5 mistakes homebuyers make
Even in this market, buyers can get tripped up. Here are a few don’ts for first-timers and buyers re-entering the scene.
By Sarah Max of The Wall Street Journal
Homebuyers are an increasingly rare breed. Many who were eager to buy a house raced to take advantage of federal homebuyer tax credits. When those government perks expired in April, home sales essentially went into deep freeze, plummeting to levels not seen in more than a decade, according to the latest numbers from the National Association of Realtors. (Bing: Find the latest information on monthly home sales)
Still, NAR projects that nearly 4 million existing homes will sell this year. First-time buyers, without the burden of a home to sell, could benefit from the foul market and record-low mortgage rates.
But woe to the overconfident buyer. Here are five common missteps that first-time homebuyers make.
1. Snubbing the real-estate agent
With so many websites offering plenty of data on listings, who needs an agent? Most people, actually.
Finding a house and figuring out comps — the price of comparable homes on the market – is the easy part. Managing the nuances of offers, inspections, financing and all the other pivotal steps to buying a home is where many new buyers tend to get tripped up, says Shii Ann Huang, an associate broker with The Corcoran Group Inc. in New York.
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When buyers hire agents to act as their representative, the agents are obligated to put the buyers’ interests first, even if their commission is paid by the seller and based on the sale price.
Skeptical? That’s all the more reason to find an agent on your terms. Ask friends and acquaintances for referrals and interview two or three candidates before deciding.
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But don’t let the agent find you. Viviane Ugalde and her husband, both physicians, made this mistake when they bought their first home in Sacramento, Calif., nearly two decades ago.
“We stumbled onto an agent when she saw us peeking in the windows of an empty house for sale,” Ugalde says. The agent, who happened to live on the same block, came out of her house wearing pajamas, offered to show the couple around the neighborhood and ultimately helped them find a house. Then the agent, who was new to real estate, neglected to show up for the closing.
“It was scary and confusing signing what seemed like a thousand pages,” Ugalde says.
2. Guesstimating how much you can afford
Many buyers mistakenly take a do-it-yourself approach to financing. They use online calculators to estimate how much house they can afford, dive into the house hunt and then get a dash of cold water when lenders refuse to qualify them for that amount.
“The process is so different than it was four or five years ago,” says Diann Patton, a broker with Coldwell Banker in Grass Valley, Calif. Not only are lenders reading loan applications closely, she says, but they’re also verifying employment and running multiple credit checks during the process.
Meet a mortgage broker or banker before you get serious about your search, Patton says. Remember, too, that the costs of buying and owning a home go beyond the sticker price. Although online calculators do account for property tax and insurance, it’s up to you to account for maintenance costs, moving fees and association dues.
3. Letting charm cloud your judgment
No one will fault you for falling hard for a charming older home. But unless the house has been painstakingly remodeled or you’re prepared to pay for repairs and upgrades, an old house can quickly lose its allure.
In 2009, Alison Koop, a public-relations manager for the University of Washington, came dangerously close to saying “I do” to a seemingly fabulous midcentury home in northeastern Seattle. Koop was so smitten with the big windows and vaulted ceilings in the living room that she neglected to notice the exposed wires, shoddy roof and other structural problems. Any delusions Koop had were laid to rest in the guest bathroom.
“When the inspector turned the faucet on,” she says, “the spigot fell off, hitting the floor of the tub with an exclamatory thunk.”If you’re considering an old home, don’t let the inspection be your last line of defense, says Jay Papasan, vice president of publishing at Keller Williams Realty, based in Austin, Texas. “Negotiate a long due-diligence period,” he says. That gives you time to get estimates from contractors and back out, if need be.
Of course, new homes can have drawbacks. Many recently built homes have experienced serious problems with Chinese-made drywall, for example. Proceed with care, whatever the home’s age.
4. Focusing on the house, not the ‘hood’
In hindsight, many buyers say they wish they’d taken their due diligence a few steps further to understand all the perks, quirks and hassles of living in a particular neighborhood. You can always fix up the house, but there’s no easy remedy for annoying neighbors, oppressive homeowners-association rules and marathon commutes.
When Laurie Tarkan and her husband bought their first home in 2001, they were so infatuated with the circa-1924 three-bedroom cottage that — in addition to brushing over some of the headaches of an old house — they didn’t consider its somewhat out-of-the-way location about a mile from downtown Maplewood, N.J., a popular New York subur
“As a first-time buyer, you’re not aware of all the things you should think about that aren’t about the house,” says Tarkan, who after living in New York City for 17 years still hasn’t gotten used to driving everywhere.
Spend as much time as you can in your future neighborhood, ideally on different days and times. Eat in the restaurants, drop in on a yoga class and test drive your commute.
5. Making arbitrary offers
With housing inventory running high and sales at record lows in most markets, there’s no shortage of houses for sale and sellers desperate to get out from under them. It’s all the more reason to hold out for the right house and the right price.
But when you find that perfect house, don’t assume you can lob a lowball offer or make unreasonable demands. Even in hard-hit markets, nice houses in desirable neighborhoods are fetching multiple bids.
If the house has been on the market for months, you probably don’t need to worry about other buyers lining up behind you. Make an offer based on recent sales for comparable homes, foreclosure activity and market trends, and don’t be afraid to start the bidding low. If the house is new to the market or recently foreclosed upon, and other buyers are circling the block, put your best foot forward, but don’t get suckered into a bidding war.
**This was an excellent and insightful article by Sarah Max for The Wall Street Journal that was posted on msn.com. Please note that some of the points are based on national considerations – for questions specific to our Maui market place please call The Hansen Ohana at (808)879-3667 anytime.