Are you ready to buy your first house? That’s exciting and possibly terrifying at the same time. But don’t worry, if you know what to look for and have a structured plan of attack, you can maneuver through the obstacles and reach the finish line with a great new home.
Before you start your search, there are few things you will want to watch out for. Also known as… common pitfalls to avoid. If you can recognize these and figure out how to bypass them before they cause a problem, you will save thousands of dollars and plenty of headaches.
Here are 7 of the 15 pitfalls that are outlined in chapter 4 of my new book – How Much House Can I REALLY Afford? Practical Tips To Avoid Becoming House Poor.
Pitfall Number 1:
Falling in love with a house before shopping around. I always recommend looking at 20-30 houses before you place your first offer. This way you will see what’s out there, at what price points and know what features you really want. If you fall in love with one of the first… you may over-pay and miss an even better, more affordable house down the road. This is a very common pitfall and it can be very costly too.
Pitfall Number 2:
Cosmetic House Flippers. Beware of investors that purchase downtrodden houses and spruce them up with cheap labor and materials in order to “Flip” them onto an unsuspecting buyer. Don’t let that buyer… be you! As the saying goes… “You can put lipstick on a pig…it may look nice… but it is still a pig”
Pitfall Number 3:
Realtor Tells You To Offer Above Asking Price. In some very fast-moving markets, you may have to offer above the asking price, but most real estate markets are not moving that fast. However, most Realtors want you to believe that they are. This is one of the most common “games” that real estate sales people play. Don’t fall for it.
Pitfall Number 4:
Make sure to add a 24 or 48 hour – “Accept, Decline or Counter” clause to every purchase offer on a home. If you offer them 24-48 hours to make a decision, you will get your answer and/or a counter offer quicker so you can continue negotiating or move on to the next property.
Pitfall Number 5:
You will also want to add a “Mortgage Financing Contingency” clause which states that if you are unable to get the mortgage financing commitment under the specific terms and rate maximum that you are asking for, the deal is canceled and your deposit is refunded. Without it, you could be on the hook.
Pitfall Number 6:
Making Too Big of a Deposit. Whenever possible, only make an initial deposit of $500 to $1,000 with the contract. Try not to make any additional deposits until closing. If you need to make any additional deposits, don’t get influenced to deposit any more than the absolute minimum required. Let the realtors know that you will not be making any deposits over 2% of the purchase price before closing.
Pitfall Number 7:
Telling Your Realtor Everything. This can be an eye opener as well. Did you know that all realtors (unless specifically acting as a buyer’s broker) work for the sellers? This is true. Even if you are working with a realtor on your own, they get paid a commission from the Seller, not you.
Tell your realtor only what you want them to know and ultimately tell the sellers. Normally you will not be allowed to meet the sellers or attend the offer presentation. The less wiggle room your realtor has, the harder they can sell to get your offer accepted… as is.
I hope this helps you on your journey to buying a house, making it a home and keeping you financially secure. Being a home “owner” can be a great thing… but if done wrong, it can become a living nightmare.
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