Reader Question: We sold our home last year to downsize and rented an apartment for a year to try the lifestyle and give us time to consider what we would do next. We are now going to buy a home, but being out of the home buying market for thirty years, what are the big mistakes today’s homebuyers make?
Monty’s Answer: Unlike many other products we consume, home buying is different for several reasons. We experience it so infrequently we don’t always know what questions to ask, real estate has its own voluminous body of law and rules, and each product is a costly one-of-a-kind item. The more apparent flashpoints, such as the home inspection, reading the contracts beforehand, and the importance of comparing agents are well publicized. Understanding the home evaluation process is another critical discussion. Sometimes, the big mistakes homebuyers make come in small innocuous packages.
Let us consider some items that can seem arbitrary at the moment but later create remorse. These errors are most likely to occur after you have identified the home you want to own. They usually happen soon before a contract is negotiated, during negotiations, or during the due diligence period before the closing. There are multiple reasons errors occur in real estate transactions; our unfamiliarity with the chain of events, numerous vendors involved in the operation, incompetence, hasty decisions created by fear of loss, and miscommunication, to name a few.
Here are some important events that get missed:
- Checking out the neighborhood – Before you make an offer if there is a homeowners association check out the rules. Every state has a sex offender registry online so use it. Drive the neighborhood and watch for anything that might warrant additional investigation. Talk with a neighbor or two very near the home of your choice.
- Confirm lot lines – Ask the agent to show you the metal lot stakes, particularly the rear lot lines. The stakes are most important when there are buildings, fences or other physical objects present. The seller may have a survey, or the municipality’s online GIS map can help determine their location.
- Checking out school districts – If there are no children present the school district may not occur to you. School districts can impact home values because highly rated schools are in demand. Buying on the right side of the boundary line can mean better resale value.
- Thoroughly inspect the home – Buyers either fear they may appear like a snoop or they think the inspector will do it for them. You should be testing the plumbing, turning on light switches, and watching for signs of insects or mice. Here is a link at https://dearmonty.com/look-at-homes-smartly/ for more details.
- Understand the scope of the inspection – The inspector’s job is to find issues that materially affect the value of the property or contain certain unsafe conditions. The home inspector does not look for small imperfections. The inspection is not meant to be a negotiating tool. There are limitations to the investigation. Be sure to attend the home inspection for on-the-spot insights. When hiring the inspector, make sure they appreciate the buyer’s right to be present.
- Know where to go when your agent is not solving a problem – If the agent is not helpful, notably if the agent created the problem, the person to speak with is the broker-owner or the designated broker managing the agent’s office.
- Shop for the right mortgage loan. Your mortgage is the second largest expense you will likely undertake in your life. While it is easy to talk to someone you know or you are aware of, they may not have the best product for your needs. The interest rate is what attracts us to a mortgage when there are several other very important components to be considered.
- Create a calendar timeline for all the contingency expiration dates – When contractual events that were agreed upon do not occur in time, the outcome can be costly or cause the transaction to fail. All to often, the importance of these dates are minimized or even forgotten. It is not uncommon that buyers sign contracts with contingency expiration dates that are unlikely to be met. Ask your agent to create a calendar with the expiration dates of all contingencies before you sign the contract. The viewers can now visualize the contract terms with the calendar’s help. While your agent follows up on the contingencies, you need to oversee the contingency is satisfied on schedule.