Let’s talk about the top 6 mistakes you want to avoid as a home buyer. These are things you won’t realize you’ve done wrong until it’s too late.
I recently got an email from someone I’m a big fan of, Dave Ramsey, titled “first time buyer mistakes”. After read through these items these are mistakes that are not just unique to first time buyers, I see people on their second, third and fourth homes making these same mistake. So let’s talk about them now.
My name it Phil Wells I’m a real estate agent serving clients in Spokane and throughout North Idaho. If you have real estate questions, feel free to send me a message here on this site.
1. BUYING TOO MUCH HOME
Number 1 is buying too much home. In my view lenders can approve people for far more house than they can actually afford. And that’s not to bad mouth lenders, they have a set of regulations they work within and maximum allowing debt to income ratios that are laid out in those regulations.
So you might feel like you’re winning at life when you pull up into that 2 car garage on closing day but when you’re 6 months in and it feels like all you do is work to pay the mortgage you’ll be wishing you’d settled for less house and had more disposable income each month.
2. IGNORING RESALE VALUE
Number 2 - is ignoring resale value
This is relevant especially in a sellers market where you are desperate to get anything under contract - it can be easy to overlook your exit strategy.
Are you buying right next to something that will be developed in the future. E.g the new north-south freeway in Spokane? What’s that going to do to your homes value in 10 years time when you want out.
What about the school district? If you don’t have kids or your kids are done with school, don’t ignore this factor, buying in a desirable school district is a lot of peoples top priority.
What about curb appeal? Is it objectively appealing? Is it the sort of house that will attract attention in any market or is it a giant builder grade cube that was built with function in mind not form.
3. SKIPPING PRE-APPROVAL
Number 3 is assuming you know how much house you can afford and beginning to shop without a pre-approval. I’ve seen people do this and honestly you’re not doing yourself any favors. There are nuances to the pre-approval process, there are certain types of income that don’t count, the length of time you’ve been in your job matters, the amount of consumer debt you’re carrying matters, there is a specific length of time a gift from a family member has to be in one account before it can be used, it’s a mine field.
You don’t want to spend a month shopping $600K homes to find out your budget is $450k. If you do you are in for a world of disappointment because everything will be worse than you expected and I don’t want that for you.
4. SHOPPING WITHOUT A REAL ESTATE AGENT
Number 4 - is home shopping without a real estate agent.
Believe me I understand some peoples desire to go it alone and find the house themselves. Some agents give the whole industry a bad reputation there’s no denying that.
But by pursuing this strategy, visiting open houses, calling random agents to see their listing or requesting tours on Zillow you’ll be interacting with more agents not less. You’ll also miss out on the opportunity to formulate a strategy with someone who operates in that market every day and can actually help you.
It also doesn’t cost you anything directly because buyers agent fees are paid for by the sellers.
It’s a very large purchase and potentially a very complex asset. If you’re a real estate attorney then be my guest, go for it. But if you’re a computer scientist with no experience in real estate other than buying a house 10 years ago then do yourself a favor and find someone you like who is experienced and doesn’t BS you and work with with them throughout the whole process.
5. BUYING MORTGAGE POINTS
Number 5 - is buying mortgage points, especially in this high interest rate environment.
With points, you pay part of your interest up front instead of over the life of the loan. But they typically aren’t worth it. Most buyers refinance, pay off or sell their homes before they reach the break-even point. This is especially the case given how high mortgage rates are right now and the likelihood of being able to refinance in the next 1-2 years.
Rather than buy mortgage points, put that extra money toward your down payment to reduce your total loan amount. That will reduce the overall amount you have to pay in interest rather than opting to pay some interest upfront.
6. STICKING WITH A BAD DEAL
Number 6 - is sticking with a bad deal
Once you’ve spent $1000 on inspections and maybe you’ve already paid for your appraisal too, the temptation is to just stick with a bad deal and close it. And I get that, we get emotionally invested in the homes we buy. But closing on a bad deal is a terrible idea.
What if the seller has refused to replace or pay for a leaky roof, are you just going to stick with that deal because you spent $1000 on it?
Be prepared to lose some money along the way. Obviously that not the plan but being prepared to walk away is the most powerful tool in any negotiation and may actually give you the leverage you need to turn that bad deal into a good one.
FINAL THOUGHTS
That’s it for this blog, please like and comment here if it was helpful.
If you have questions feel free to give me a call, shoot me a text, send me an email or dm me on Instagram or Facebook and I’d be honored to work with you.
Thank you for stopping by!
