When you have been a Realtor as long as I have, you begin to see a pattern that home buyers make when looking for and negotiating the price of a new home. Try as I may, I never seem to be able to convey to buyers what the hurdles are or convince them what should be done during the home buying process in order to avoid making mistakes that could have easily been avoided.
Home buyers tend to look at real estate brokers as used car salesmen; they tend to think all we are going to do is tell them what they want to hear or lie to them just to get the sale. What buyers do not understand is Realtors are held to a higher code of ethics than any other salesperson in any other industry. The legal litigation that could peruse any un-ethical Realtor accused of doing any “shady dealing” could follow them to their grave.
For Realtors, the code of ethics in which they operate under is often a higher standard than any local, state, or federal law. Unethical Realtors are not long in the profession as any serious violation of the code of ethics in which they operate under would see their professional career come to a quick end.
So how did Realtors get the stigma that we are all liars, out to sell you a shack for a mansion price, kiss our check at the closing table and ride off into the sunset never to be seen or heard from again? Ninety nine percent of the time when a home buyer is not happy with a real estate broker the fault is not with the broker, the fault lies with the home buyers unwillingness to listen or be open to advice. Rather than admit they made a mistake and take responsibility for it, it is easier for them to blame the broker.
Average home buyers purchase maybe 3-4 houses in a lifetime yet always seem to know more about conducting a real estate transaction than their real estate broker does. You would think after surviving in this market and still being able to hang our shingle in front of a house we would know a thing or two about running a business and conducting a real estate transaction. Yet with half of new home buyers comes a hip-pocket real estate professional that needs to teach us how to do our job or think they can do it better than we can and they are the ones consistently unhappy with the job we did for them in the transaction.
So I have created a top ten list in ascending order of the most common mistakes home buyers make when searching for a new home that create situations Realtors ultimately get blamed for. Before undertaking the process of searching for a new home with serious effort there are a few things you as the buyer need to consider.
If you remain conscious of these ten mistakes and avoid making them, you will find your real estate transaction will go infinitely easier and you will have confidence that you had a clean transaction, you purchased a quality house and your Realtor did a great job.
10. Buyers are not honest with themselves when determining what they can afford. A few extra hundred dollars in the payment, add an extra hundred in the Home Owners Association fee, 10% higher tax liability, higher insurance rate due to that beautiful waterfront location and the maintenance of owning a larger home adds up to a lot more than just a few hundred bucks in the mortgage payment. You need to be honest with yourself and not look at that new home emotionally; you need to look at it realistically. If you can not afford it, do not buy it and if you do, do not blame your Realtor if you purchased a house you could not afford.
9. Buyers do not get pre-approved for a loan. This house you have had your eye on goes up for sale and the first thing you do is get on the phone with the Realtor, schedule an appointment and write an offer contingent upon financing and at the last minute you discover you do not qualify for the loan. Realtors are not underwriters. We do not have access to your financial history. We do not know what you can or can not qualify for. Before you engage a Realtor to show you a home and help you with the purchase offer, you need to get a pre-qualification letter from your lender.
8. Buyers try to save money by not hiring a professional home inspector. A $500 inspection can help you distinguish the house from hell from a heavenly home. Professional inspectors will check everything from the foundation to the shingles on the roof and everything in-between. One of the biggest threats to many homes in the US is termites. Natures clean up crew can not tell the difference between a dead log in the forest and a dead log holding up your home. If it is wood and it is dead they are going to eat it from the inside out. I have seen homes condemned for the lack of structural soundness due to past termite infestations. Pay the $500 and get the professional inspection.
7. Buyers do not re-visit the neighborhood at various times of day or go to meet the neighbors. A twenty minute walk through is often not enough to learn about everything that comes with the purchase and this includes the neighbors. Try to imagine closing on your new home, vacating the old one, and your neighbor is the closest thing to Satan incarnate you have ever met. You are left with two choices, well three but one will land you in prison. You either sell the house and relocate or learn to live in hell until your evil neighbor next door decides to move and torment someone else. Take the time and go meet the neighbors and get their take on the quality of the neighborhood.
6. Buyers thinking they are ready to buy a new home when they are not. I have had a lot of sellers come to me to list a home for them after they recently closed on it because they discovered they did not need that second vacation home in Florida. Make sure you are ready to undertake the responsibility and expense of a second home. Once that offer is accepted and you have put your earnest money down, if you decide to back out you have lost your earnest money. If it is a significant amount your only other option is to close and re-sell the home and hope you get your money back. Be absolutely sure you want that second home.
5. Buyers purchase a foreclosure or a fixer-upper that needs a significant amount of work without realizing how much that work would actually cost. Sometimes a deal on a home that seems too good to be true actually is. Many do-it-yourselfers buy a property thinking the repairs will cost many thousands less than what is actually required to get the home to pass a county building inspection. Ultimately they find themselves over budget and do not have the money to complete the repairs. Getting a quote from a reputable builder to ascertain the actual cost of making a home move in ready will help you to make an educated decision and discover if that house is as good of a deal as you think it is.
4.Buyers are fearful of paying too much for a home and constantly make low ball offers. This is probably the number one waste of a Realtors time. We spend hours driving clients around showing them properties and every low ball offer they make either offends the seller and the seller does not respond or a savvy investor comes in, offers a realistic price for the home and the would be buyer looses the chance. Chasing your tail is a waste of your time, the Realtors time, and the seller’s time. If you have your eye on a property that is priced to sell make a realistic offer. If there was a chance of someone stealing the home a professional real estate investor would have already done it.
3. Buyers sit and wait for shadow inventory to arrive. There are two kinds of money in the real estate market, smart money and dumb money and right now the smart money is buying homes. I have never seen more professional investor activity than what I am seeing now, not speculator activity, investor activity. Investors are not only buying one home, I have seen investors come in and buy 15 homes in one month. If there was a large amount shadow inventory looming that would be offered at a significant discount, the smart money would be sitting on their hands and waiting and this certainly is not the case.
2. Buyers think financing is not available to them. Though lending standards have definitely tightened up, financial institutions are still lending. FHA loans are extremely attractive at the moment and can offer up to 3.5 percent to cover closing costs, interest rates are at 50 year lows, lenders are making profits despite the high foreclosure rates and they are looking for people to loan money to. Currently good credit with an established job history and a minimal down payment is enough to get you a loan in many cases. Nearly 500 homes a moth are changing hands in my market alone. Call your lender; you may be surprised what you qualify for.
1. The number one mistake buyers are currently making is thinking the market prices for homes will go lower. When you can by a home for less than what it costs to build one, you are at the market lows. There is no room for home prices to go lower, banks are not offering deep discounts on foreclosed properties in fear of destroying neighborhood values and they certainly are not willing to take offers significantly less than the listed price.
Now is a very good time to purchase real estate. With 30 year mortgage rates at historic lows and houses being offered at prices below replacement cost, a buyer in this market will have a myriad of choices to choose from. If you avoid these 10 most common mistakes and remain focused and realistic in the home buying process you will come out a winner. The prize: A great house for a great price and you will be very thankful for the assistance your Real estate broker provided. We are not here to take advantage of you; we are here to help make your real estate transaction a pleasant one.
By: Christina L Miller