From the beginning of your home search through closing escrow, there’s an awful lot to think about and do. It’s not unusual to make a mistake along the way. But with the financial stakes so high, a false move can end up costing you a lot of money.
Here are five common home buyer mistakes, with tips on how to avoid them.
You expect to get the price down after making an offer
The real estate market is heating up across the country. In many markets, homes are selling for more than asking price. Some buyers win the bidding war by going over asking — only to try to negotiate the price down by asking for credits during escrow.
This strategy may work sometimes, especially in a weak seller’s market. But we’re in a competitive market for buyers now, so don’t count on it. The seller most likely will have a backup offer from another buyer who really wants the home — and who is hoping your deal falls through. If you start asking for unwarranted credits, the seller may simply go with the backup offer, leaving you out in the cold.
A better strategy: Make your best offer, and don’t assume you can negotiate it down later.
You wait until the eleventh hour to ask for credits
In Houston, a seller had put his house on the market with full disclosure that it had termites. A buyer made an offer and went into contract with the seller. After further inspections, and at the eleventh hour, the buyer demanded an unreasonable amount be deducted from the sale price. The buyer assumed that the seller, not wanting to put the house on the market again, would agree, just to close the deal. But that’s not what happened. The seller agreed to reduce the price, but not by the full amount the buyer wanted.
The buyer ended up walking away from the deal. The house sold soon after at a higher price than what was negotiated with the first buyer.
Of course, you should ask for credits if an inspection turns up potentially costly repair work you didn’t know about when you made your offer. But even in a buyer’s market, don’t assume you can get sellers to cave in to unreasonable demands at the last minute.
You chase a deal at all costs
Everyone wants to save money, especially on a high-ticket item such as real estate. Unfortunately, this causes some would-be buyers to make lowball offers in hopes of getting a “deal.” Or, potential buyers lose out on homes they might have been able to get otherwise, which ends up costing money in the long run.
For example, a renter in San Francisco spent three years looking for the best “deal” she could possibly get, passing up many good opportunities. Eventually, her landlord wanted to sell the place she was renting. This forced her to finally buy, but under pressure. She ended up buying at the top of the market. If she hadn’t held out for so long in hopes of scoring an amazing deal, she’d have saved herself a lot of money and time. She’d even have built up some equity in a home over those three years.
In a strong real estate market, the deals are in homes that have been overpriced and haven’t sold as a result, and/or properties that don’t show well because they need work. If the home you want is well-priced, in a good neighborhood and doesn’t need much work, the best strategy is to make a solid offer and be prepared to go over asking if necessary.
You think you can do it all yourself
With so much information about homes available online today, many people, such as tech-savvy Gen X and Gen Y home buyers, may assume they can buy a home without a real estate agent’s help.
But this strategy often backfires. First of all, the real estate agent’s role isn’t just about finding listings. With Internet access, buyers can easily find listings themselves. The agent’s role today is more about presenting your offer to the seller’s agent in a way that will help get it accepted and making sure it sticks through an escrow.
A savvy agent knows the ins and outs of the local market better than an uninformed buyer with a full-time job and family. A good agent will know the back-stories behind the comps, for example. He or she will know that a comparable home sold for 5 percent less (than the home you’re considering) only because the sellers were divorcing, or the property had a retaining wall problem. Without an agent, you’d simply see that the comparable home sold for 5 percent less. You might ask the seller of the home to match that 5 percent reduction — and you’d be surprised when the seller says, “No thanks.”
Also, experienced agents have a strong network in the local market, which can give you an added edge. Good agents like to work withother good agents. And if nothing else, keep in mind that a listing agent might not even consider working with an unrepresented buyer.
Finally, the seller pays the buyer’s real estate commission, so having an agent for your home search costs you nothing anyway. Most importantly, there’s bound to come a time during the complicated real estate transaction when you have serious doubts or big questions. Your agent can be the trusted adviser you need to walk you through the maze.
You don’t think like a seller
Most likely, at some point in the future you’ll need to sell the home you’re about to buy. That’s why it’s important to think like a potential seller as well as a buyer.
Case in point: In 2005, a buyer in San Francisco bought a home with no garage. The house was on multiple transit lines, he used his bicycle to get around and he knew he’d have access to a leased garage space if he needed it. So he felt he didn’t need a garage.
Three years later, the market was slower, but the owner had to sell. He didn’t feel his home should be priced less than a comparable property with a deeded garage because his house was so centrally located. Plus, he had that leased garage space to offer. The problem was, many buyers drive to work, and they don’t want to risk losing a leased garage space. The result was that many buyers wouldn’t even look at his home’s photos online, let alone go to the open house — because it lacked a garage.
So when you’re buying a home, put yourself in a potential seller’s shoes. The last thing you want is to buy a dream home that becomes a nightmare when it’s time to sell.