We’re all humans, and humans make mistakes. That’s just a fact of life. Unfortunately, when mistakes happen, they are often costly. Therefore, we owe it to ourselves to mitigate mistakes as best we can. We’ve written about all kinds of mistakes people make in real estate. Here is our list of the top 10 mistakes people make when dealing with real estate and real estate transactions.
Top 10 Real Estate Mistakes Buyers Make
- Failing to work with a Real Estate Broker – This is by far the biggest and most costly mistake people make in real estate. Working with a good Real Estate Broker will probably mitigate several of the other items on this list. Here are a couple articles we’ve previously written about the importance of and how to choose a Real Estate Broker:
- Failing to Get an Inspection – Not getting an inspection can really cost you in the long run. Inspections cover the physical property and its systems. Finding out ahead of time that there is a problem makes all the difference. I have seen some inspections come back with such significant problems, such as roof or foundation issues, that the buyers elected NOT to purchase the home anymore. These “hidden” problems can present a major expense for you in the future; make sure you know about them. For additional info on the importance of inspections read:
- Failing to Shop Loans – Most real estate transactions involve a loan. If you are going to get a loan for real estate, it’s important that you get at least 2 quotes for your loan. Have different lenders give you info on the best loan for you. The terms and rates will vary from lender to lender, so you have to get what is best for you. For example, if you purchase a $500,000 home with 20% ($100,000) down, you will need to finance the remaining $400,000. A difference of 0.25% on the rate over a 30 year fixed loan translates into more than $20,000 over the life of the loan. Be sure and check out:
- Failing to Get a Contractor Opinion – Just like with mentioned with the property inspection, you must know the physical and aesthetic needs of your property before you buy it. Have a contractor go out and take a look. Reputable contractors will be able to give you estimates on how much it will cost to make repairs, replace carpet, paint, etc after you close. Knowing these figures ahead of time can save you from making a costly mistake. Here are some tips on how to choose the right contractor to work with.
- Failing to See the Property Enough – This is an easy mistake to make. Make sure you check out the property more than once. Check the property in the morning, afternoon and evening at a minimum. There are a few things you need to make sure you find out. First of all, what is the traffic like during rush hour? There are places in LA where it can take 30 minutes to go 1 mile at the wrong time of day, wouldn’t it be nice to know what you are dealing with before you make that first commute? A homes exposure (the direction that faces the sun) can be a huge factor in a homes desirability. Some homes, oriented in the wrong direction and with windows in the wrong places, can be extremely difficult to keep cool. In addition to possibly making the home uncomfortable to live in, it can also add big bucks to your monthly electric bill.
- Failing to Understand All Ownership Expenses – When you purchase a home, your lender will cover the expenses you pay for them, they will explain all the costs associated with owning your home (or rather, with paying your loan). However, there are more expenses than just loan payments. Some homes can have all or some of these: Real Estate Taxes, Homeowners Insurance, Flood Insurance, Earthquake Insurance, Mortgage Insurance, Mello Roos, HOA Dues, Utilities, Lawn Care, Initial Repairs (retro fits), On Going Maintenance (changing light bulbs, filters), Capital Expenses (paint, carpet, roof, fixtures, appliances, HVAC). Be sure and read:
- Low Ball Offers – Everyone wants a good deal, however, you do not want to be greedy. A list price is a seller’s expectation of value, and you never want to insult a seller if you’re trying to buy their house. Take for example a property that is listed for $500,000 but you think it’s only worth $380,000. There are plenty of properties like this on the market right now. You should think twice before submitting that offer if you really want it. By submitting an offer 20-25% below list price, you will likely upset the seller. This could make them not want to sell you the property at all. Even if you end up being the highest bidder, they may still be so insulted by your first offer, they may not be willing to work with you. If this is the case for you, have your broker discuss it with the seller or listing broker first. Have them feel out the seller, if there is a 0% chance of you taking it home for $380,000, why even waste the time making the offer. For more tips on making an offer that will be accepted try reading:
- Failing to Adequately Research the Area – Use all the resources at your disposal. Make sure you’ve done all the research you can before you purchase a property. Call the local building department or planning department to find out if any major construction projects are under way. These sources can also provide you with liquor license applications to know if any new liquor vendors will be in the area. The local school board can help you research the schools in the area to find out of they meet your standards. Are you close to a good hospital? What about crime? You want to be informed on every aspect imaginable, to protect the major investment you are about to make. For more details as well as resources for researching the area, check out our recent post:
- Failing to Adequately Research the HOA – If the property you are considering purchasing is in an HOA, you first need to know about it. This means it will have some sort of a monthly, quarterly or annual HOA payment. Then you need to find out about the HOA itself. HOA’s have covenants, conditions, restrictions, rules and regulations that govern the property. These can and will affect your use of the property. Some HOA’s have strict rules on parking, guests, common area use and pets. Make sure you are ok with all the governing practices of the HOA before you buy. Finally, and perhaps most importantly, check out the financial standing of the HOA. Believe it or not, some HOA’s are bankrupt. Make sure that your HOA is bringing in enough money in dues to cover all annual operating expenses. Also make sure they have an up to date reserve study and reserves in the bank to cover the study. If you are purchasing a home in an HOA make sure and read both of these:
- Misusing Contingencies – Contingencies are available and put into contracts to protect a party. If used properly, contingencies can really protect you in a transaction. However, over using them can really weaken your offer. If you need a contingency for your loan, put it in there, that’s a good idea; this way if you do not end up getting your loan, you can cancel and get your deposit back. However, avoid using contingencies that aren’t needed. More contingencies increase the likelihood that you will not close, so therefore your offer is weaker than the same offer with less contingencies. For more information on contingencies try reading:
By avoiding these mistakes that people constantly make, you can have a better real estate experience. This means it will move more smoothly, save you money, and cause less headaches. Who wouldn’t want that? Contact Us if you have any questions, would like to add a mistake to our list, or to speak with one of our expert brokers.
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