Buying a house is supposed to be the American dream, but it can turn into a nightmare for buyers who go into the process with unrealistic expectations and insufficient information.
"The process of buying a home [can be] excruciating," says Craig Evans, an Ally Bank mortgage executive with more than 30 years of experience in the industry. There are some things that seem to trip up homebuyers again and again. Here are the mistakes real estate experts say people make when buying a home:
Failing to get pre-approved. Before they even start looking at homes, buyers should get pre-approved for a mortgage. Not only does this ensure they are visiting houses they can afford, it also avoids the heartbreak that can come from missing out on a hot property when multiple people are placing offers. "There's nothing worse than having a buyer find the home of their dreams, and they are not pre-approved and need to place an offer in 12 hours," says Tim Savoy, a sales associate with Coldwell Banker Residential Brokerage in the District of Columbia.
Neglecting to factor in all the costs. One reason for the housing market collapse a decade ago was the number of homebuyers who purchased properties with costs beyond their means. "Lenders own a lot of the problems that happened in the past," Evans says. "We put [people] in homes they really couldn't afford." Regulatory changes were enacted to help avoid a repeat of that situation, but buyers still bear responsibility for ensuring they can afford all the costs of homeownership. Those include property taxes, insurance, closing costs and association dues.
Not shopping for the best mortgage product. Evans says there are more than 6,000 places to get a mortgage in the United States, and some companies may offer only a limited number of products. For the best deal, homebuyers should check with at least two or three lenders for their rates and terms.
What's more, buyers should be sure to read the fine print and take into consideration all their closing costs. For example, points are fees paid by consumers in exchange for a lower interest rate. "Some lenders might promise a buyer a great rate, but don't disclose how many points need to be bought at the table," Savoy says.
Opting out of the digital mortgage process. While not every lender offers a digital option for income and asset verification, consumers should consider opting in when it's available. "It's startling if you have to go through the manual process," says Laura Williamson, senior vice president of client services for mortgage solutions firm Digital Risk. Lenders who can electronically verify information may be able to close in as little as 10 days, compared to 45 days for those going through manual verification. It also eliminates a headache for borrowers who otherwise have to dig out months of bank statements and pay stubs to prove they can afford the mortgage.
Thinking your mortgage company will remain the same. The mortgage company that approves the loan might not be the one receiving subsequent payments. "Consumers should know it is very customary for loans to be sold after closing," Williamson says. Homebuyers should watch for a notice of a mortgage sale to ensure their payments are routed correctly and late fees are avoided.
[Read: 7 Homebuying Mistakes to Avoid.]
Seeing paperwork for the first time at closing. Sitting down to a closing with a stack of papers to sign can feel like a high-stakes experience. Homebuyers have brought their money to the table and are planning to walk away with the keys to a new property. "All these things create pressure to just sign," says Lionel Urban, vice president of product management for mortgage provider PCLender. However, that paperwork could include provisions, such as releases of liability, that aren't favorable to buyers. "The right thing to do is get copies of the documents days in advance," Urban says. That way buyers have plenty of time to review the paperwork or have someone they trust look it over prior to signing.
Not understanding property restrictions. Not every mistake homebuyers make is financial in nature. Some people fail to realize the property they've selected comes with a laundry list of restrictions. "If it's a co-op, as are most apartments in New York, there are a lot of rules," says Phillip Salem, a professional real estate salesperson for Triplemint in New York City. Those rules may restrict everything from what improvements an owner can make to when trash can be taken out. Homeowners associations can also make similar restrictions, and both associations and co-ops can charge residents substantial monthly or annual fees.
Using the wrong agent. A lot of mistakes can be avoided by having the right agent or broker helping with the buying process. "A first-time homebuyer needs someone who's going to spend a whole lot of time with them," Evans says. Meanwhile, a repeat buyer who is investing in real estate might not need much assistance with the selection process, but could use someone who is savvy about financing options.
Visiting the property only once. A single showing will only tell you so much about a property. At 12 p.m. on a weekday, the neighbors might all be gone and the traffic minimal. "I always make sure my clients see an apartment a few times at different times of the day," Salem says. That avoids situations in which someone moves in only to realize that the walls are paper thin or the street gridlocks during rush hour.
Forgetting to consider uses of nearby properties. When viewing a home, people should consider how nearby properties can affect their quality of life. Living near a school, for instance, may be convenient, but will traffic and noise from Friday night football games be a nuisance?
While no one can predict the future, homebuyers should also remember that neighboring properties can change over time. "You might have this amazing view, but come to find out there is a 70-story high-rise going up in front of [you]," Salem says. Likewise, fields can become subdivisions and vacant lots can turn into businesses. Check with local zoning administrators to find out what's allowed in your area and whether any potential projects are already in the works.
Skipping a home inspection. In a seller's market, waiving a home inspection may be one way to make an offer more attractive. However, that tactic could backfire if a buyer later discovers serious problems with the property. Along with getting the inspection, be realistic about how its findings affect the affordability of a home. "If you're really tight on your finances and getting into a home that needs repairs, can you afford those repairs?" Urban asks.
Buying when you should be renting. The biggest mistake can be simply buying a house in the first place. "It's not cheap to buy a house," Evans says. He estimates there could be as much as $10,000 in transaction costs associated with the purchase of a $300,000 house. That's in addition to moving expenses and other incidental costs. While buying a house can be a wise investment for those ready to settle down long term, the cost may not make sense for those planning to move in two or three years. In those instances, renting may be more cost-effective.
Buying a home can be an exciting time in a person's life, and by avoiding these pitfalls, it can be a positive experience as well.
Set yourself up for a quick sale.
The peak homebuying season may be over, but there are still steps you can take to ensure a speedy sale. Setting the right price and making an excellent first impression are both essential to attracting buyers, but what else can you do to get the offers rolling in? Here are 10 tips to help you sell your home as quickly as possible – even in the offseason.
Price it right from the start.
Sellers often think they should start the asking price high and then lower it later if the house fails to sell. But that can result in a slower sale – sometimes even at a lower price. “The first 30 days’ activity of your house being on the market is always the best activity you’re going to see,” says Michael Mahon, general manager of HER Realtors in Columbus, Ohio. If the price is too high, many buyers and their agents will stay away, assuming you’re not serious about selling or you’re unwilling to negotiate.
Enhance your home’s curb appeal.
This could mean adding new sod, planting flowers, painting the front door or replacing the mailbox. Prospective buyers form an opinion the moment they spot the home. "Curb appeal is everything,” Mahon says. “Driving into the driveway and walking into that front door sets the expectations.”
Update the interior and exterior.
(Valua Vitaly/Getty Images)
New fixtures, fresh paint and updated landscaping are all fairly easy and affordable ways to give your home a makeover. “It’s got to look up to the current market conditions and what’s in style,” Mahon says.
Clean, declutter and depersonalize.
The fewer things there are in the home, the larger it will look, so remove knickknacks and excess furniture. Also take down family photos, religious items and political posters so prospective buyers can envision their family in the house, not yours. Finally, you may want to hire a cleaning service to do a deep cleaning.
Stage the house to show how the rooms are supposed to be used.
If you have odd rooms with no obvious role, give them one. An odd alcove off the kitchen could be staged as an office or a pantry, for example.
Make the property easy to show.
The more flexible you are about visits, the more people will be able to see your home. Be ready for prospective visitors early in the morning, at night and on weekends, with little notice. Also, leave when the house is shown so would-be buyers can feel free to move about without feeling like intruders and discuss the home's pros and cons honestly.
Remove your pets.
Also remove their paraphernalia, such as dog dishes and cat litter boxes (or at least hide them). A prospective buyer shouldn’t even know that a pet lives in the home if you can help it, Mahon says.
Make sure your listing is on all the major online portals.
This is usually part of an agent’s service, but it doesn’t hurt to double-check that your listing is on Zillow, Trulia and Realtor.com. It also helps if your agent showcases the home on social media. “We sell as many homes off Facebook as we do off the [multiple listing service],” Mahon says. Both the agency and the individual agents have Facebook business pages where they share listings.
Ensure the listing has good photos, and lots of them.
Most homebuyers start their search online and decide which homes they want to see based on the photos. You probably want something better than snapshots taken quickly with your agent’s phone.
Share information about life in the neighborhood.
The listing should include photos not only of the house, but also of nearby recreation, dining and shopping areas. If the schools are good, make sure that information is in the listing. “You’re not only marketing the home – you’re marketing the lifestyle,” Mahon says.
With more than a decade of reporting experience, Ms. LaPonsie’s work has been featured on MSN, CBS MoneyWatch, Yahoo Finance, NerdWallet and numerous other sites on the web. She has been a guest of Consumer Talk with Michael Finney and The Steve Pomeranz Show.
A native of Michigan, Ms. LaPonsie received her bachelor’s degree from Western Michigan University. You can follow her on Twitter or connect with her on LinkedIn.