To the great relief of many people, both inside and outside the real estate industry, it looks like the worst part of the falling real estate market may be behind us. It’s risky business attempting to predict market ups and downs (see below) but at least in some parts of the USA it does appear that buyers are beginning to emerge from their lengthy hibernation. If you are looking into the possible purchase of a home, here are the top ten potential problems that you should avoid before signing on the dotted line.
1. Failing to Obtain Home Loan Pre-approval Documentation Getting pre-approval for a home loan is an important first step for potential buyers. Getting a mortgage pre-approval will give you a much better idea of the total loan amount you can readily borrow. Being pre-approved also indicates that you are serious about buying. Most sellers with worthwhile homes won’t even bother considering a purchase offer unless it is accompanied by confirmation of loan pre-approval. Additionally, should any problems with your credit worthiness crop up it is much better to recognize them at the start of the process, while you still have time to take action to rectify them. Encountering a credit problem after you have already committed to a home purchase can be quite upsetting.
2. Not Hiring a Buyer’s Agent Unless other arrangements are made, with nearly all full service real estate companies, the buyer’s agent works for you at no cost to you. His or her commission is paid by the seller’s broker after the sale closes. Hence, it is in your best interest to hire your own representation - a buyer’s agent - instead of working with the seller’s agent. The seller’s agent is obligated by law to act in the seller’s best interest, not yours. By using the services of a buyer’s agent you can level the playing field since a buyer’s agent is required to serve in your best interest.
3. Hiring the Wrong Real Estate Agent Before working with a buyer’s agent, you should interview several different agents. Ask for the names of previous clients so you can check references. Don’t limit yourself to agents with large brand name offices or so called “million-dollar” agents. Also, before hiring a friend or family member who is an agent, remember that if you are dissatisfied with the service being provided, it is much easier to drop an agent with whom you have no personal ties.
4. Not Understanding the Length of Time the Process Takes Buyers, and sellers, sometimes believe that the home buying process is shorter than it really is. There are a wide range of unforeseen problems that can result in delays. Sellers can drag their feet on formally accepting an offer, you may have problems selling your present house, the loan processing may be held up, repairs may need to be completed, problems with obtaining a clear title to the property may arise, etc. Murphy’s Law always seems to surface when trying to close a deal promptly. Be sure to allow at least two to three months to complete the transaction.
5. Assuming the Appraisal and/or the Tax Assessment Equate to the Market Value. Appraisals and tax assessments are designed to be objective estimates of value. However, different appraisers can report considerably different results. Buyers should have their agent perform a comparative market analysis (CMA) to get a better idea of the home’s current market value prior to offering to buy.
6. Trying to Time the Rising and Falling of the Real Estate Market Trying to time a purchase with when the market has hit its low point is just about impossible. I would be an extremely wealthy man if I were able to do so! Both buyers and sellers should realize that a sound real estate investment is nearly always a long-term investment.
7. Ignoring Reality When Looking for Your Dream Home When buying a home, if you only follow your heart and not your head, you will most likely be in for some ugly surprises. That magnificent home may appear to be your dream home, but make sure you bear in mind everything involved. Take into account such unexciting issues as the effect a larger mortgage payment might have on your resources, commuting distances, the availability of local schools and shopping facilities, the effect of property taxes and homeowner association in addition to other quality-of-life aspects of home ownership. That extraordinary house may not be worth the headaches it causes for you and your family.
8. Failing to Remember That Timing Is Everything As you can probably imagine, paying two mortgage payments can be incredibly hard to manage. When thinking about selling your current home and buying another, understand that the sale of your current home is the more crucial of the two transactions. If you would be unable to make payments on two loans, if at all possible, try to secure the sale of your current home before committing to purchase a new one.
9. Not Understanding the Contract. Remember that a purchase contract is a legally binding document. Not understanding what you’re agreeing to can be a big mistake. Read the agreement carefully prior to signing and get clarification if there is something you are unsure about. Don’t be afraid to have your attorney review it,if you wish. Ensure that it contains everything you it should, including which party is paying for what. Verbal agreements should be included, in writing, in the contract. Make certain that your agent takes an activerole in the developing of and negotiation of the contract. Hurrying through this step can add delays and cause financial and emotional pain.
10. Not Conducting a Criminal Search for the New Location. Agents in most parts of the country are not obligated to notify buyers if there is a sex offender or other illegal activity in the neighborhood. Contact the local police department or sheriff’s office to find out how to gain access to local sex offender and related criminal databases. In addition, the internet has made this information much easier to obtain in recent years. There are many online resources for locating this information. Visit the website backgroundcheckpoint.com for information about several of these investigative resources.
Jim Navary has been a freelance writer and researcher for over thirty years covering a broad range of subjects. He is also a licensed real estate salesperson in the Commonwealth of Virginia specializing in real estate in the Tri-Cities area of Virginia and Petersburg, Virginia homes for sale.