Top five home-buying mistakes
You can't build a good house out of stumbling blocks. With that fortune-cookie saying in mind, beware of the following common home-buying mistakes:
1. Misunderstanding the real estate agent's role
Real estate agents are very friendly. That's a major part of their job. In the course of shopping for a house, a homebuyer spends a lot of time with an agent. However, the wise homebuyer understands who's working for whom. Unless the agent is an exclusive buyer's agent, he is working for the sellers. Most U.S. states require them to tell the homebuyer this up front, but it's easy to forget. Canadian buyers should pay special attention because several provinces including Quebec do not have disclosure requirements.
If an agent's potential dual role is a concern, a homebuyer should hire a buyer's agent who is contracted to work for the homebuyer. This doesn't cost any more than a traditional agent. A wise homebuyer will agree to work with the agent for 30 to 90 days and is wary of anyone who insists on upfront fees or a long-term contract.
2. Falling in love
If you think a house is ideal, don't let the seller or any of the seller's agents know. If the seller finds out you're in love with the house, she could hold out for a higher price.
A wise homebuyer knows there are lots of houses — and there is one out there that's the right house at the right price. If you can't afford it, move on and keep looking.
3. Not doing proper research and preparation
Understand your family's finances and needs. The wise homebuyer will analyze assets, decipher debts and pull credit reports before plunging into the house hunt. Understanding your finances prevents wasted time looking at unaffordable houses. Before making any offers, get pre-approved — not just pre-qualified — for a loan.
Learn how to fit a mortgage and housing costs into your budget by using our calculator.
- Know the neighbourhood. Remember, you're not just buying a house; you're also buying a location. With the agent's help, a homebuyer can find out about the quality of schools, the crime level and upcoming zoning issues.
- Make a proper offer. Don't base your offer on the seller's asking price. Instead, get a comparative market analysis from your agent. This analysis will reveal recent asking and sales prices of similar homes in the neighbourhood. With this, a wise homebuyer can make an offer that is reasonable for that area.
- Understand the responsibilities and costs of homeownership. The wise homebuyer knows owning a home is complicated and potentially expensive. Besides the mortgage, plan on paying for insurance, assessments if any, property taxes, repairs, appliances, landscaping and improvements.
4. Not getting two important contingency clauses in the contract
When making an offer, a wise homebuyer asks for two important clauses — a mortgage financing contingency and a professional inspection contingency. These could save a lot of money and grief.
The mortgage financing contingency clause saves you if the home doesn't appraise for the offered price. You can cancel the sale and renegotiate the price or get back your deposit.
The second clause hinges the deal on a professional inspector OK'ing the house. If the inspector discovers hidden flaws, structural damage or faulty systems, the wise homebuyer may want to renegotiate or back out of the deal. An even wiser homebuyer goes through the house with the inspector to learn about any concerns the inspector has.
5. Buying a house that is tough to resell
Many homebuyers stay focused on finding a home sweet home where their families will be happy and safe. But you should also remember this is a big financial investment. Take a moment to look ahead to the day you'll sell the house. Knowing the neighbourhood and paying attention to marketable details of the house will go a long way toward preventing a buying mistake.
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