The housing market shows no signs of slowing down. According to TD Bank’s Fourth Annual Mortgage Service Index, 56 percent of American homeowners feel it’s a "good time" to purchase a home, while 71 percent felt their most recent buyer experience was "very good" or "excellent," up almost 10 percent in the last two years.
It’s no mystery that when the housing market is blazing stiff competition for homes increases. Making the wrong move in a saturated market leads to financial remorse or house buying misery. To prevent this agony, below are some common mistakes you should avoid as a first-time buyer.
Mistake #1: Working with the seller’s agent
Not getting professional help can leave you strapped for cash. Since we only buy homes about three times in our lifetime, the first time is the most challenging, says John Montemayor, licensed realtor at Century 21 Redwood Realty. Unfortunately, some buyers solicit the help of the seller’s agent, which could potentially be a recipe for disaster.
First-time buyers should interview and select an Accredited Buyer's Representative (ABR), he adds. The great thing about partnering with ABA agents is that you work with licensed professionals in the state they serve and with members of the National Association of Realtors. They understand the special needs of buyers—especially first-time homebuyers—and they have additional knowledge and experience that takes them beyond an agent who only concentrates on listing a property for the seller.
Montemayor says that because the buyer's agent will be compensated through a commission split from the seller’s side "there’s no out of pocket expense" to the first-time homebuyer when seeking professional help from a qualified agent.
Neglecting to work with a licensed realtor exposes you to unscrupulous vulnerabilities, such as dealing with the listing agents whose principal objective is that of the sellers.
Mistake #2: Choosing the priciest home
Buying the most expensive home you qualify for is not a wise move, says Mark Ferguson, a realtor and creator of Invest Four More. The lender doesn’t know how much you should spend on a house, just how much money the bank will lend you. Unfortunately, many buyers max out on how much they can spend, leaving them with nothing left for savings.
Mistake #3: Not educating yourself
Another problem is not taking their time to shop around. "We are in a crazy market, and many buyers feel rushed," says Ferguson. Although you have to act quickly to get a home in some areas, it doesn’t mean you should feel pressured into purchasing the first house you see.
Spend some time learning the markets and its values so that you can get a good deal. First-time buyers run into trouble when they don’t understand all the expenses involved when purchasing a home. "There will be insurance, taxes, mortgage, utilities, maintenance," and other unexpected incidentals, says Ferguson.
Becoming well versed about the market and competition in your area ensures that you’re not kicked out of the bidding process and can help you secure the home that’s perfect for you.
Mistake #4: Jumping in without organizing your finances
Not having your financial ducks in a row can delay the purchasing process. Montemayor says you should first figure out what you can afford, then get pre-approved for a mortgage. Working with a professional lender with programs specifically catered to first-time buyers will make the process much smoother.
For instance, Realty Plus is a free nationwide real estate assistance program that provides cash back based on the purchase or sales of the home. When you have your financial portfolio in place, you’ll be surprised to learn of loan programs with a reduced down payment requirement.
Owning a home does come with a sense of accomplishment, but you don’t want to make costly mistakes by biting off more than you can chew. Planning a lavish vacation or purchasing furniture before settlement are two culprits that affect your credit score and jeopardize your chances of sealing the deal.
Mistake #5: Not visiting the house enough
Montemayor says he tells new buyers to remember that a house location is fixed and doesn’t change. So before making an offer, scout the neighborhood during different times because you don’t want to end up purchasing property next to a late night restaurant with a midnight trash service run.
Mistake #6: Being indecisive
Kwame Joseph, licensed realtor at Coldwell Banker Residential, says that many first-time buyers "suffer from the fear of missing out." When working with buyers, "they may find a home that they love, and though their gut tells them it’s the right house for them, they believe that there’s something better," says Joseph.
Although shopping around is a smart move, indecisiveness in a hot market like the District of Columbia means that buyers potentially risk being locked out of the bidding process.
"I’ve had clients make an offer and still want to see other properties while the current bid is on the table," Joseph says. A buyer risks running into challenges when their current bid is accepted, but they are no longer interested in the property—backing out of a deal could be very costly.
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