5 Mistakes Inexperienced Homebuyers Make
Posted on Oct 31, 2013 in Mortgage Market Updates and NewsRES Real Estate Simplified
It is completely natural to have a bit of trepidation when you area approaching the purchase of your first home. That is because there are a lot of things to take into account that you may not have considered at first. You need to recognize that you as the buyer have a great deal of power in the transaction and that so long as you keep some key points in mind you will end up with a deal that you are satisfied with. Here are some things to think about as you approach the real estate market.
Beginning Homebuyers Make Many Mistakes
Wading through the market for homes can be quite confusing when it is your first time. If you’re inexperienced in the way of purchasing homes, it can be easy to fall into simple traps that will have you burning a hole in your pocket without you even realizing.
The following are five mistakes the beginner homebuyers make. By learning from these mistakes, you can get the home you want at the price you want.
Mistake 1: Comparing Based On Listing Price
When browsing the market, many home buyers tend to judge whether a home is a good deal or too expensive by looking at the prices the properties are listed for. For example, a real estate agent could give you a tour of three homes similar to one another within the same community. The three listing prices for the homes could be $163,000, $172,000, and $189,000.
If you only look at the listing prices, the obvious home to go for would be the $163,000 one. However, before you make a decision, what you should really be doing is looking at the sales of homes comparable to these three, also known as “comp sales.”
Mistake 2: Trusting The Price
A seller’s asking price doesn’t always match the value of the home. Many sellers ask for an amount that doesn’t match up with where the housing market is currently at. Real estate agents take advantage of this by showing eager buyers overpriced homes and then following up with one that is tens of thousands of dollars less then the first homes that were shown.
The agent will pressure buyers to snatch up the deal and the buyers will fall for it because the price is so much lower than what they were shown previously. The way to avoid this mistake is to check the selling prices of homes recently purchased within the area.
Mistake 3: Underestimating Negotiation Potential
Don’t let a listing price you don’t like scare you off. Many sellers will accept offers lower than their initial asking price. In the case of the home selling for $163,000, that owner may only be willing to drop down to $162,000. But what if the owner asking for $172,000 has become so desperate in the face of a slow market that they’re willing to take anything they can get, even as low as $150,000?
You’ll never know how low a seller is willing to go until you engage in negotiating with them. You can talk to either the seller or their agent. Use irrefutable facts about the market to gradually walk the away from their dream price. If you can talk a seller that has overpriced their home into a much lower price, you may end up with a better bargain than the least expensive home currently on the market.
Mistake 4: Not Questioning The Appraisal
If you’re new to buying homes, more than likely, you’re not going to question what an appraisal says a home is worth. Some real estate professionals will suggest that sellers work an appraisal to their advantage: they’ll get a written appraisal valuing their home at more than it is really worth and then list their price below that to make potential buyers feel as though they would be getting a bargain.
For example, an agent might tell buyers that the seller is practically giving their home away, because their asking price is $25,000 less than the appraisal, but the buyers could still really be overpaying.
Mistake 5: Trusting Appraisers Blindly
The value of an appraisal is limited. In a market where home prices aren’t steady, an appraisal could become outdated within a month or two. Even more important than when the appraisal was performed are the dates of the comparable homes, or comps, used for reference. Appraisals use the prices of similar homes; ideally, these appraisals should be no older than 90 days, but in slow markets, they can go back as far as six months to a year.
Older comps generally have little bearing on the present market. It’s also important to know that an appraisal is just one person’s opinion of what a home should be worth. Appraisers can miss defects, or even ignore obvious ones. You should never allow a seller to use an appraisal to rope you into a price you don’t like.
Negotiating To Get The Best Deal
Being a new homebuyer can be treacherous, but an informed shopping should be able to make their way through the process safely. Here you learned that you don’t have to accept a high asking price, and that you can’t know how low a seller is willing to go until you talk to them.
You should also try not to put too much stock into an appraisal. With all the room for error, blindly putting faith in one is never a good idea. With the advice here, your dream home should now be within reach, potentially at a much lower price.
At the end of the day, you should look at it like this: the only one standing between you and the best possible deal on a new home is you yourself. You owe it to yourself to go into the process as informed as you can be and to do your due diligence regarding both the property and the person or entity you are negotiating with. Your new home is within reach all you must do is keep the above mistakes and solutions in mind.