Purchasing a home can be a confusing and overwhelming process. There’s the fun part of choosing a home. Then, there’s the stress of dealing with finalizing financing and repair negotiations. For a first-time buyer who has never had the experience, it can be easy to make a mistake here and there, but reading up on the process can help prevent doing anything too detrimental. Here are some of the mistakes first-time home buyers make.
1. Choosing Features by the Wrong Timeline
Buying a home is not a short-term investment. To make a purchase worthwhile, a buyer should live in their home for 2-5 years to recover closing costs, build equity, and avoid certain taxes or mortgage penalties (dependent on the contract) that may come from selling too soon. Many first-time home buyers are young professionals and/or couples. If they have a clear understanding of where their lives are going over the next 5 years, they could save money purchasing a home to fit their needs (bedrooms for future kids, a yard for pets, a workshop for a growing business, etc.). However, if they purchase too large of a home or one with features they don’t really need, they could end up paying out money over the span of years that could be better spent other places or saved for retirement.
2. Requesting Showings from the Listing Agent
The traditional way purchasing a home works is that a buyer secures a buyer specialist who arranges private visits to properties they are interested in. However, most buyers start their home search online, which gives them a convenient avenue to request showings. Depending on how a specific website is set up, the buttons to request a showing may lead directly to the listing agent or a separate buyer specialist. While clicking on the button may seem like the easiest way to a solution, it could hurt a buyer’s purchase.
First, it’s in the buyer’s best interest to not use a listing agent to purchase property, though they legally can in North Carolina. The listing agent agrees to put the seller’s best interests first when they sign the listing agreement. This means they won’t be working in the buyer’s favor during negotiations. Even if they agree to step back from both sides and just act as a paperwork shuffler, that means the buyer won’t get to use them as a resource. So, buyers should always hire their own real estate agent before seeing homes. As lines become blurred when representing both sides, most listing agents will refer buyers to other agents to make things easier and more ethical throughout the transaction.
Second, if the buyer already has an agent, they must be the ones to schedule the showing. Not only must they be present for the showing to make sure they are familiar with the property but to assure no info is shared that may leave the buyer at a disadvantage. Even if a buyer just has a question about a property, the buyer specialist should be the one to enquire. First-time buyers should only request a showing if they have not hired an agent (signed a document that says they’re being represented) or are ready to represent themselves in the purchase.
Also, keep in mind that a buyer’s agent should be used in the instance of purchasing new construction, and the agent should make first contact with the builder’s onsite agents. If they don’t, the builder can exclude them from the buying process and leave the buyer without any representation. “First contact” includes signing up on their website to receive information. Some builders are more understanding than others, but it’s important to understand that buyers must declare the representation early in the process if they want to use an agent.
3. Looking at Homes They Can’t Afford
The first step to purchasing a home should always be getting pre-approved with a lender. This determines the price range the home buyer should be staying in. In a market where homes are going quickly, buyers need to be laser focused to get the home that will work best for their needs. Being unrealistic and looking outside that price range isn’t just a waste of time but could be self-sabotaging.
Note: Sometimes buyers will look above their price range in hopes of negotiating down. This rarely works, especially when inventory is low and sellers have the upper hand.
4. Focusing on the Surface
Who doesn’t want a beautiful home with shiny new faucets, sparkling tile, and gleaming wood flooring? Over three-quarters of buyers are on the hunt for a house that has the latest and greatest. However, focusing on homes with only attractive new finishes could mean a buyer is overlooking a home with a better floor plan and location, just because it needs some updating. Keep in mind, fixtures, tile, and flooring can be updated much more easily than the bones or location of the home. So, first-time buyers should be willing to look past the surface and see a home’s potential.
5. Not Considering the Additional Costs of Buying
Most buyers know they need a down payment to purchase, but not all buyers realize there are additional costs. These include inspections, surveys, closing fees, etc. There may be options for reducing these expenses, but first-time buyers should be prepared to put forth additional money upfront. This amount can vary by location and purchase price, so it’s best to discuss with a local REALTOR.
6. Skipping the Home Inspection
When first-time buyers see the cost of purchasing a home, they start to look for ways to cut expenses. The home inspection is one of the first services they consider dropping because it’s a significant chunk of money to shell out upfront. However, this can be a huge risk. Purchasing a home doesn’t always fall into the category of “you get what you see”. While a home inspector won’t rip open walls or take apart systems to diagnose issues, they will look for signs and symptoms of underlying problems, like cracks that may indicate foundation issues or wood rot resulting from a slow leak. A home inspection could save a first-time buyer from a poor investment and an even bigger expense in the future.
7. Asking Everyone for Advice
We understand that everyone has a person (or two) who they go to for advice. However, buyers should consider everything they hear subjectively. The real estate industry has changed a lot over the past decade. Forms, policies, and laws are updated every year. If the person isn’t in the industry, it can be hard to keep up. It’s a good idea for buyers to base their decisions on information provided by professionals (inspectors, licensed contractors, attorneys, etc.), who work by a code of ethics, don’t have an emotional investment, and are more likely to provide just the facts.
Conclusion
Many mistakes made by first-time home buyers are the result of being hyper-focused on one thing – if it’s finding the perfect home or solving a major issue. Yet, it’s important to envision the whole picture. The perfect home isn’t so perfect when it impacts your finances in a negative way, and ruling out a home in a great location because it doesn’t have the ideal counters may be a regrettable choice. It can be helpful to have a third-party provide some perspective, especially in the case of long-term investments in a local market. That’s one of many reasons to hire a real estate agent.
If you’re thinking of buying a home in the greater Wilmington area, give us a call at (910) 202-2546. We’d love to talk with you about the services we provide. You can also get a brief overview on our Buy With Us page.
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