Shopping for a new home is one of the most exciting projects you and your family can undertake. With every house you tour, you find yourself imagining what life would be like if that were your new home. Unfortunately, the excitement you feel while looking for your next home can lead you to make some major blunders that could cost you money, time, and heartache. If you’re in the market for a house, make sure you don’t commit any of these four home buying blunders:
Not Getting your Own Agent
When you pass through neighborhoods with houses for sale, most of the for sale signs include the smiling portrait of the seller’s real estate agent with an admonition to “Call Kristy!” if you want to look at the house. But using the seller’s realtor to look at homes is a major mistake. The seller’s agent has been hired by the person selling the house, so that means the agent is hoping to get the highest price possible for their seller.
While it is not a conflict of interest for an agent to serve as both seller’s and buyer’s realtor—and in fact, many agents would love to collect the double commission for doing just that—it simply doesn’t make sense for the buyer to use the same agent. For example, you want to be able to tell your agent what your absolute price limit is, without the number being relayed to the seller. Also, you want someone who is not trying to sell the house to you to be able to give you the skinny on how it fits within the local price range, what kind of maintenance issues it has, etc. While all of this is information you can get for yourself, it’s much easier and safer for your wallet to simply have your own agent.
Falling in Love
When my husband and I moved to Lafayette, Indiana two years ago, we were in contract for a cute little bungalow that we had both really fallen in love with. But the house and both garages needed new roofs, and the seller was refusing to take care of the problem on the garages. Even though we were in a bit of a time crunch—our temporary housing was only good for a few months, and we had a baby on the way—we decided after some contentious back-and-forth with the sellers that we would just have to find a new house.
In fact, we probably waited a little longer than we should have to make that decision. But we had already imagined ourselves living in the bungalow and daydreamed about paint colors, decorations, and gardens there. The sellers had been hoping to take advantage of our emotional attachment to the house. But the most important tool that a buyer has in negotiations is the fact that he can walk away at any time. Don’t forget that, no matter how perfect the house may seem.
Neglecting to ask for Inspection and Mortgage Finance Contingencies
When you’re ready to make an offer on the house, it’s wise to ask for these two contingencies. The inspection contingency means that you can back out of the deal if the professional home inspector finds a major issue that needs to be dealt with—like the faulty roofs on the house and garages our inspector found. You want to be able to ask for mitigation of the problem, or allow yourself the opportunity to renegotiate or even drop the offer altogether.
A mortgage finance contingency is helpful if your prospective home does not appraise for the price that you offered. This contingency will allow you to renegotiate the price or cancel the sale and potentially get back your deposit.
Not Having a Reserve Fund
There is more to saving up for a house than just the down payment and closing costs. You also need to make sure you have money set aside in an emergency fund for when the water heater breaks or the dishwasher floods the kitchen—not to mention the money you will need to do the fun stuff that makes the house yours, like paint, furnishings, curtains, etc. Having to put every last penny you have in the bank’s hands on your closing date means that you will be in a tough financial situation for months or years after you move in.
Wow. The inspection part is inexcusable. Whenever I hear about someone with house troubles, it’s always followed by “I should have paid for the inspection…” Yeah, you should have.
I completely agree. The $200 inspection can save you thousands down the road.
Always get an inspection! You never know what you’re going to find!
The reserve fund is vital, you can think you budgeted for everything, chances are you didn’t. Be it connection fees for cable, internet, electricity, stocking up the cupboards and cleaning products if it is your first house, or buying furniture that will fit better than your old, there is always something!
I agree Pauline. I think it took me 2 home purchases before I realized this. There is always another couple hundred dollars that needs to be expensed on something.
Great tips. When we bought our first home about five years ago it was refreshing to see both our agent and mortgage bank encourage us to have a backup fund. Not that we would not have had one anyways, but they’re vital because things just break at the worst times.
ooooo…these are some good ones. Falling in love is a huge mistake; there is FAR too many homes available and people willing to compete to fall in love with one. You’d be making a serious mistake and would likely lose a lot of money.
I could still get emotional if I think about “the house that got away” today. We put an offer on a house before this one, and it slipped through our fingers. We made a very fair offer and I immediately fell in love with it upon sending over the proposal. Well, we thought we had it in the bag, or that maybe they’d make a counter. Apparently, someone else also fell in love with the house. They came back to us and said that someone else had made an offer as well, and wanted to give us another chance to give them our best offer. We came up a bit, but couldn’t see paying more than market value. The other couple must have wanted it more…or just had more money than us. It upset me so much that I didn’t even want to look for other houses! I know that’s pathetic, but I really loved this house and it was right down the street from a good school for the kids. Well, a few weeks later, we found this house….exactly one neighborhood away from “the house that got away!” It’s also right down the street from a great school and has *almost* everything that was on my wishlist, except for that big walk-in closet…that I couldn’t afford to fill up anyway! Blessing in disguise? 😉
-M
Everything happens for a reason. 🙂
I’d add buying too big of a house. Many times you are looking for a house and it’s easy to see one you like that only $5,000 more. Then you find another one at that price. Eventually you are looking at these houses and are justifying the increased price. If you aren’t careful, you can easily go over your budget.