Buying a home is an exciting time in your life. And buying your first home is a great accomplishment. But there are some things to be aware of so you don’t get buyer’s remorse.
Today’s article is all about first time home buyers. First time home buyers often get pulled in so many different directions on guidance from parents, friends, neighbors, and others on how to best go about their home search. And because of all the noise out there, I thought it would be beneficial to you to come up with a list of 9 first time home buyer mistakes that I’ve seen so that you can avoid making these mistakes.
The first and biggest mistake that first-time homebuyers are making is that looking before you’re financially qualified. This one is so important. And I don’t know if all first time home buyers are getting together and saying, “OK, we’re not going to get pre-qualified until we’re ready to write an offer”, because it certainly feels that way sometimes. There are a lot of mortgage calculators and sleek looking websites out there that you can punch in your income and what you want your monthly mortgage to be and it will spit out your budget, but that is the wrong way to go about getting pre-qualified. You need to talk with a lender before you start looking at houses. Why? Why is this so important? Because you don’t know what you can afford until you’ve been told what you can afford. You don’t get to determine your budget. That’s the lender’s responsibility. You are setting yourself up to fail if you don’t talk with a lender. You may think you can afford a $600,000 house in Houston when in reality you can only afford a $300,000 home in Katy. Listen I know you’re excited to see houses and I know you have your checklist, but that’s meaningless without financial qualification. So go out there and talk with a local lender.
The second mistake is looking for a unicorn
Speaking of your checklist, hopefully, you wrote it using a pencil and not a pen because you might need to make adjustments on what you’re looking for. Yeah, that home with a 2 car garage, fenced-in backyard, finished basement, with the open kitchen that’s walkable to your favorite shops and restaurants do not exist. It only exists in your mind. And if it does exist in real life, it’s twice your budget. Think about what’s most important to you and know that you’re not going to get everything. The goal is to find a home that meets 75% of your criteria, and then it’s up to you to make up that last 25%. You are not living on HGTV. There’s a lot more value in buying something outdated and slowly making it yours than only considering homes with granite counters and stainless steel appliances.
Mistake number three is
Using the listing agent to represent you. Let’s say you walk into an open house, you decide you love the house and you want to write an offer so you talk with the listing agent who’s at the open house and that agent agrees to help you. Who better to help you write the offer and facilitate the transaction, than the listing agent who knows the home and can directly talk with the seller, right? Wrong. The listing agent’s best interests are in helping the seller get the most money in their pocket. Oh, maybe you thought the agent would cut their commission if they represented both sides? Maybe, maybe they cut it 1%. But if the property is overpriced by 5%, are you really saving money? And what happens when the deal goes sideways. Do you think the listing agent is going to have your back? This is probably the largest financial transaction that you’ve made in your life up until this point. Do you want someone that represents the other side’s best interest, or your best interest? You want someone in your corner to guide you and lead you with your best interests in mind. You want a buyer’s agent. Do your research and find a good buyer’s agent who’s an excellent negotiator. If you’re in the Houston area, you already know who to call. And in your local area, just as you research homes, and mortgage companies, research and find a great buyer’s agent.
Mistake number four is Looking too much into online home values. I’ve held hundreds of open houses. I’ve interacted with thousands of people in the D. C. Metro area and not one time has someone said, Hey I’m here from Zillow and I’m going to walk the property to calculate the Zestimate. It’s because it doesn’t happen. Zillow never goes into properties. How can they have an accurate pricing tool if they don’t step foot inside of a home? Zillow even admits that their Zestimates are inaccurate. Just to give you an idea, Zillow’s own CEO sold his home for 40% less than the estimated value. It’s almost comical when someone presents an offer and cites the Zestimate as the logic behind the offer. A better way to determine a home’s value is to study the market and look at what comparable properties have sold for. That’s it. You don’t need a fancy algorithm.
Mistake number five is Expecting the value of the home to increase.
Guys, it’s not all rainbows and unicorns. The reality is that your home value might not increase after you purchase it. It may even decrease. You should purchase your home because it’s a smart financial move for you, it helps your family, and it increases your quality of life. And if the market, which by the way, you can’t control happens to go up during the time you own the property, good for you. However, if your whole goal is to try to time the market and get in and get out at the exact right times, you’re not going to win. The truth hurts. And if you’re disagreeing with this point, maybe you need to take a deeper look. Look I’m not saying it’s OK to buy an overpriced home. I’m not saying it’s OK to buy in a neighborhood that doesn’t see appreciation. It’s more the mindset that you’re going to buy this home, live in it for 7 years, have your first kid, then sell it for 10% more when you’re ready for your second kid. It’s not going to be 75 degrees and sunny all the time. Sure there are certain things you can do to increase the likelihood that your home will increase in value. But at the end of the day, this is your home, your well-being, your livelihood. Make sure that your quality of life is what you are looking for first, because that what’s most important, and if your home increases in value, even better.
Mistake number six is Underestimating your expenses
Things like utilities and extra unexpected repairs eat up a lot more than you initially think they would. The general rule of thumb is to estimate about 1% of the purchase price of the home for yearly maintenance, repairs, and major yard work. There’s a saying that goes, Once you buy your house, things start breaking. You should be saving and budgeting, anticipating that things are going to break. There are hidden costs of owning a home and while you don’t need to know all the hidden costs, you should budget for extra costs and expect the unexpected.
Mistake number 7 is Feeling rushed. This one is a tricky one and let me tell you what I mean. Do not let anyone make you feel like you have to decide and make an offer before you’re ready. If you’re rushed and you’re unsure of things, it’s inevitable that the end outcome will not be a good one. You may lose a house because you’ve taken the time to think it over and by the time you’re ready, the house is off the market. It’s easy to fall in love with a house, but there are other houses. Now with that being said, if you are in a market where homes move fast and the market is strong, you may need to reconsider your strategy. It’s ok to take your time at first. However, there is a difference between feeling rushed and dragging your feet. If you consistently see that properties go under contract after the first weekend or in a short period of time, it’s a sign that you need to strike quickly. So take your time, learn about the market, get an idea of how fast things are moving, so that when you are ready to move forward, you do it quickly and aggressively.
Mistake number 8 is falling in love with the house. We kind of touched on this earlier. Only in rare circumstances will this be your forever house where it will immediately meet all your needs now and forever. Or if you’re like the rest of us, the house will be suitable for a few years then you’ll move to the next house. Now obviously everyone’s life is different. This may be the house that you live in for the next 20 years. And that’s fine. I’m a big proponent of thinking and acting logically and rationally. If you fall in love with the home before you write the offer, you’re going to overpay for the house. Or someone will outbid you and you’ll compare every future house to the house you lost, and that’s not good. It’s ok to love the house after you move in. Don’t get attached to houses if they are on the open market. They will disappear, they will go under contract, someone else will buy them. But guess what, another house will come on the market. And this one might even be better than the last one. You only have so much energy. Don’t waste it by falling in love with a fairy tale. The time to celebrate and the time to fall in love is after settlement and after you’ve moved into your new home.
I am going to end my list of first-time homebuyer mistakes by touching on something that might catch a few of you off guard. Mistake number 9 thinking renting is throwing away money. And the mistake that some first-time homebuyers are making is that they are buying a home. Now I’m a salesperson. My job is to sell homes. But guess what, there are a lot of you out there that would be much better off not buying right now. It’s very simple. Renting versus owning depends entirely on your own personal circumstances. If you move around a lot? You should probably rent. If you have kids and want them in the same school, buying is probably a better route to take. Figure out your ‘Why’. Why are you going to buy? Decide if it’s right for you. There are 2 additional items on this point. The first being is that if you look at the long-term, many people end up with a much larger nest egg via real estate investment. And two is that many people who are at retirement age have the equity in their home that makes up the largest portion of their wealth. The lesson here is that purchasing long-term is probably the best financial decision to make, with the caveat that purchasing right now, this instance because your brother told you to, or because you want to make your parents proud may not be the best plan. And there’s nothing wrong with renting right now if it fits and is congruent with your current situation. Alright, ladies and gentlemen there you have the 9 mistakes that first time home buyers are making. I hope that you’ve learned something. If you found this article helpful go ahead and let me know that you liked this article. Thanks for reading. Until next time, create a productive day. Take care.