Buying a house is a huge financial step, and is one you need to take with careful consideration. It’s the quintessential American dream, but can quickly turn into a nightmare if you don’t do your due diligence. Typically, it’s new home buyers that tend to experience the worst nightmares because they simply overlook the fine print.

Understanding the mistakes that can be made during the buying process can help you build financial security without getting sunk into a money pit.

Here are 5 common mistakes new home buyers make that you should be aware of and avoid.

1. Skipping the Mortgage Pre-Approval

One of the first mistakes newbie home buyers do is fail to get pre-approved for a mortgage. First of all, getting pre-approved will give you a ballpark figure of what you can comfortably afford. There’s no sense in pounding the pavement in search of your dream home if you can’t afford the one you decide to buy. You’d be unpleasantly surprised to put an offer in on a house, only to be turned down by the bank because your finances won’t cover the costs of the home.

Not only that, but consider the seller’s point of view in the whole scenario. Let’s say the seller’s got a few bids on the property, and is in a position to sift through and compare them all. How will your offer stack up? If you tell the seller that you’ve been pre-approved for a mortgage, you might be a safer bet. If you don’t, you might be a risky bidder. Some sellers might even refuse to consider your offer at all unless you’ve got a pre-approval document from your lender. Even if the seller picks your offer, you might not be able to get as much financing as you would have hoped when you actually go through the loan application process.

At the end of the day, a pre-approval will paint you in a better picture to a seller. During this process, your lender will verify your finances and credit to see how much the bank is willing to loan you.

2. Foregoing the Home Inspection

When you’re putting up a lot of money to buy a house, you can’t just rely 100% on what the sellers and their realtor tell you about the home. Sure, they’re liable for providing you with a disclosure of everything they know that might be wrong, but even the sellers themselves might be in the dark about problems that are lurking behind the walls.

For this reason, you absolutely need to get the home inspected before you close the deal. If you skip this important step, you leave yourself vulnerable to being stuck with a home with foundation problems, mold, plumbing issues, asbestos, and hoards of other potential issues. As much as you might be attracted to the home, it could turn into a liability when everything is said and done.

Make sure that your offer is conditional upon a home inspection being conducted and passed. Make sure that you agree on what will be checked, which can (and should) include the foundation and structure, plumbing, electrical, heating and air conditioning, and mold or pest infestation.

You’d be wise to make sure the inspector is licensed and reputable. While the inspector might not necessarily be able to detect every major problem with the home, it’s definitely your first line of defense against getting stuck with a home that will cost you tons of money in repairs.

3. Getting Emotionally Attached to a House

Being in love can be an amazing thing, but it can also be a bad one, especially when your emotions are vested in the wrong thing. If you happen to stumble upon your dream house, you need to use extra caution.

First of all, if you happen to set your eyes on a home that other buyers have on their radar, you may be competing with them. If you find yourself in the middle of a bidding war, you could wind up losing out on the home altogether, or you could be snuffed out by someone else who has more money and all the right criteria that the seller expecting. You’ll be left heartbroken when you don’t walk away with the keys.

On the other hand, you just might be the one to sign on that dotted line of a purchase agreement. There are many times when the house you think is the one for you is actually one you should have walked away from. No matter how many times friends or family warned you about the place, you still might end up going ahead and sinking your teeth into it.

Think about how you’ll feel about the house after the ‘honeymoon’ period has come and gone. You might decide to overlook a property’s quirks now, but there’s a good chance you could suffer buyer’s remorse after the deal is sealed and you’re stuck with a super-small kitchen or no backyard.

When you’re in the market to buy a house, make sure you do your best to keep a cool head during the entire process so you do the thinking and decision-making with your logic instead of your emotions.

4. Not Thinking About Resale Value

You’re in the market to buy a house, not sell, so why would you even think about selling in the future? Simple. You just never know what the future holds, and don’t want to feel like you’re stuck in your home just because you won’t recoup much money after you sell.

You might get a job transfer, marry someone from the opposite end of the country, or simply can’t afford to keep up with your current mortgage payments. Whatever the case may be, you want to be able to ensure that your house can sell for a decent amount that you can then put towards another home.

This isn’t just a place where you live – it’s an investment. You’d be mistaken not to consider the resale value of the property. Consider the preferences of other home buyers. Maybe this means buying a home that has 3 bedrooms, a decent backyard, or a 2-car garage. It also helps to know if there are loud train tracks close by, or if developers plan on improving the neighborhood in the near future, which could boost the property’s value soon after purchasing.

5. Not Using a Real Estate Agent

If you’re serious about buying a home, do yourself a favor and hire an experienced real estate agent. These experts can give you invaluable advice about buying property, and can keep you from making a huge mistake. They can help steer you in the right direction about where to find the right property, and will use their sharp negotiating skills to help get you the best price possible and ensure you never overpay.

Realtors will help you navigate the complicated waters of purchase agreements, and will make sure you’re fully protected before you sign on the dotted line. All the services they provide come without the price – it’s generally the seller that flips the bill for both the seller and buyer agent.

A lot of first-time home buyers think they’re making all the right moves, but they still aren’t familiar with what can be a complex home buying process. Rather than taking a chance, use your better judgement and get acquainted with a real estate agent who can help you migrate through the buying process and avoid some seriously costly mistakes.

Plenty of sellers believe they could potentially save themselves a few bucks by going it alone without the help of a real estate agent. Unfortunately, trying to sell a house without a real estate agent can actually cost sellers more money than the commission they might have saved. Agents are experts in marketing properties and negotiating fair prices, are educated in the sales process, and understand the ins and outs of valuing a property.

Here are some solid reasons why you should never take a real estate agent out of the home selling equation.

Setting the Right Listing Price is Tricky

List prices for homes for sale on the market aren’t just picked out of thin air. Determining a selling price is an art form, and needs to be done with careful consideration. Under- or over-pricing a home can cost you a ton of money.

The best opportunity to sell a house is when it first comes out on the market, particularly in a seller’s market. Buyers are waiting for the right property to be listed, so it’s crucial that the home is priced properly right from the get-go.

If you over-price your home, buyers might not even look at your listing. The property will likely wind up sitting on the market for weeks – or longer – until you have no choice but to lower the price to gain more attention. By then, the listing has gone stale, causing buyers to wonder if there’s something wrong with the property.

The longer a house sits around on the market, the more stigmatized they become. Even if you lower the price to the right value after a while, the property still might not sell for what it could have if you had priced it right from the start. And during all that time the house sat around waiting to be snatched up, you’ve been spending hundreds or even thousands of dollars in carrying costs.

Under-pricing your home can have financial consequences too. While you could sell your house really quickly, there’s a big chance you’ll leave a lot of money on the table, and sell it for a lot less than what it’s worth.

Many sellers may want to stir up a multiple offer scenario where a number of buyers are bidding for your property. While this could drive the price up a little, this scenario might only attract buyers who just want a great deal. Even if you wind up with a selling price that’s over the listing price, chances are you could have actually gotten even more money if you had you priced the home correctly.

The majority of buyers will base their offers on the listing price, and not necessarily on what the property is worth. They’ll just assume that you’re asking fair market value for the home. Pricing the property accurately based on fair market value will almost always help you sell for the most money.

Accurately valuing a home is one of the most important aspects of selling. Without experience, knowledge and MLS access, properly valuing a home is near impossible. It’s hard to get information on recently sold properties, which shows how much similar properties in your neighborhood sold for in the recent past. Active listings can give you a rough idea about the value of homes, but what if they’re over-priced? Real estate agents are experts at determining property values, which can take years to understand.

Real Estate Agents Know How to Market Your Home

Selling a house involves a lot more than just planting a ‘For Sale’ sign on the front lawn and adding a few pictures to your Facebook page. Marketing a property is complex undertaking, and one that requires the right tools and a little know-how.

A real estate agent will know how to take the best photographs and virtual tours to advertise. He or she will know the best websites and magazines to use, and typically have a lot of contacts to communicate your listing to. A lot of times these agents already have buyers waiting for a house just like the one you’re selling.

Agents also have access to the most powerful marketing tool in the world of real estate – the MLS. This platform allows agents to advertise listings to other real estate agents and their clients.

While there are some companies out there that offer low-fee MLS services, there are a lot of issues associated with them. For starters, the service might never even see your home in person, and possibly enter inaccurate information about it with no photos. As the seller, you’ll be responsible for taking calls and setting up viewings.

If you find a buyer that’s being represented by a real estate agent, you’ll still have to pay the buyer’s agent if your home was entered in the MLS. After you’ve paid the MLS listing company, and buyer’s agent, how much are you really saving at the end of the day? Top that off with the disadvantage of not having a professional represent you and assist you with contracts, negotiations, appraisals, and so forth.

Negotiating Can be a Challenge

Wheeling and dealing directly with a buyer can be an awkward scenario at best. While many might assume that there’s more transparency through direct negotiations between buyers and sellers, this is usually a tough relationship. An experienced real estate agent knows exactly how to navigate the waters of negotiating a fair price for your home. As a messenger, your real estate agent is typically in a better position to negotiate a higher without scaring off the buyers.

Realtors can also act as a buffer between you and the buyer, and prevent any potential bad blood from killing the deal. An agent can speak on your behalf in tough transactions and prevent the talks from getting too personal. Having a hard-nosed estate agent in your corner will represent your best interests without turning off buyers who want to nickel and dime you.

The Bottom Line

Sellers don’t save as much as they think by trying to unload a property on their own. In fact, many times they wind up spending more. The majority of buyers work with real estate agents; if you have little to offer the buyer agent, you basically eliminate most of the buyers in your market. This will do nothing more than reduce your selling price and cost you money.

And if the buyer is represented by a Realtor and you’re not, you’ll suffer during the negotiating process. The buyer’s agent has the best interests of the buyer in mind; you’re on your own. At the end of the day, working with a real estate agent can save you a lot of effort, headaches, and money.

 

 

 

In many homes, hardwood has replaced carpet as the primary flooring type, especially in rooms like living rooms and kitchens. New homebuilders are aware of the trend and have shifted their design choices accordingly. However, many older homes still have carpeting throughout, leaving homeowners with a dilemma. Should they remove the carpet and replace it with hardwood or leave it as it is?

Hardwood flooring has several benefits over carpeting, but there are some disadvantages, as well. Before making the decision to replace carpeting throughout your house, there are three questions you should ask yourself.

Will You Be Selling Soon?

Today’s home shoppers are likely viewing a large number of homes with beautiful hardwood floors throughout. This has upped the game for sellers of older homes, who are now required to compete with brand new homes in the same price range. While hardwood flooring is the top request of homebuyers, this may not translate to every room. Some consumers have stated a preference for carpeting in bedrooms, which allows them to step onto a soft surface when they get out of bed in the morning. Hardwoods in areas like kitchens and bathrooms can also turn some buyers away, since these areas are prone to spills and moisture. For that reason, some homeowners choose instead to install tile or laminate flooring in these rooms.

Do You Have Allergies?

Carpet has gotten a bad rap for its supposed contribution to allergies and asthma. However, a 15-year study in Sweden determined no correlation between the two. In fact, the study pointed out that when carpet use declined in the country, allergies increased by 30 percent. Some postulate that carpet acts as a filter, trapping allergens that might have otherwise been floating freely in the air. If carpet is cleaned regularly, it may be a better option for families that are concerned about air quality. When handled by a qualified professional, even the most deeply-embedded particles can be removed, keeping the home free of allergens.

Are You Prepared for Maintenance?

Whether you find hardwood maintenance easier than carpet depends largely on your preference for sweeping versus vacuuming. Carpets should be cleaned at least once every one to two years—more frequently if your household has pets. Hardwood flooring removes the need for this type of cleaning, but don’t assume wood-based flooring doesn’t have its own maintenance requirements. At least once a year, homeowners should use a wood-cleaning product to deep clean floors and remove any dirt and grime that builds up. Many experts recommend also using area rugs throughout the home to reduce dirt and protect wood from furniture marks. Just like carpet, these area rugs will need to be vacuumed and deep cleaned on a regular basis to remove embedded dirt.

Hardwood floors can up your home’s value by meeting customer demand. But consider the maintenance requirements of this type of flooring before making the commitment. If you don’t plan to sell your home soon, it may be best to leave the carpet in place until you prepare to sell, especially if you enjoy the feeling of carpet beneath your feet.

Your kitchen cabinets are totally outdated, and the peeling vinyl countertops are nothing but an eye-sore. It’s time for a kitchen overhaul, but how exactly are you going to come up with the funds to pay for it?

Instead of dreaming about a new kitchen, make it happen with these financing strategies.

Tap Into Your Home Equity

Probably one of the easiest and cheapest ways to finance a kitchen remodel is to use the equity you’ve already built in your home. A home equity loan gives you the total amount of money up front to pay for the work that needs to be done all in one shot. After the money is taken out, it’s paid back in monthly installments.

This type of loan is not unlike a regular credit card: just take out the amount of cash you need, and pay back what you’ve used. The only difference is that the interest charged on a home equity loan is much lower than that of a typical credit card.

A new kitchen usually adds value to your home, which means you’ll actually be putting more equity into it my improving it. Depending on the extent of work being done, you could boost your home’s value up to 75% of the amount of money spent on the job.

Use Contractor Financing

Many contractors offer financing for work that they do. After an initial deposit is put down, the remainder of the money is paid back in installments over a specified length of time. Ideally, the contractor should be giving you a detailed invoice a number of times throughout the renovation process.

Never pay a contractor in full up front for work that hasn’t been done yet. While the contractor is most likely an honest person, there are still shady people out there who have no problems scamming their unsuspecting clients and bailing in the middle of the job after they’ve gotten their money. This makes paying in installments an ideal alternative to paying for the work up front in cash.

Take Out a Second Mortgage

In addition to your first mortgage, you could take out a second loan registered against your home, and pay both of them back simultaneously. You’re allowed to borrow up to 80% of what your house is appraised at, minus whatever is left to pay back from your first mortgage. While this is a viable option, you should only consider it if you are certain that the added value to the home is more than the cost of the renovation.

Borrow From Pre-Paid Mortgage Payments

Some lenders might let you borrow any money that you’ve already prepaid on your mortgage. For instance, many homeowners may ‘double up’ their monthly mortgage payments when they’ve got a little extra cash to put towards their home loan. Similarly, they may put a lump sum towards the principal at the end of each year if there’s a surplus of money to do so. This money is then added to the principal on your mortgage, which you may be able to borrow against to help fund a renovation.

Take Advantage of a Title I Loan

There’s a program available through the U.S. Department of Housing and Urban Development that insures lenders who offer home improvement loans, and is known as the ‘Title I’ program. With this arrangement, you have to pay 1% of the loan amount, up to a maximum of $25,000.

Homeowners who don’t have enough equity built up in their homes can take advantage of a Title I loan, which features payment plans and interest rates that are usually affordable for most. Many kitchen renovations would qualify for this kind of loan, but you should still check with a local Title I lender to verify if your particular project does.

The Bottom Line

There are plenty of ways to get your hands on the cash you need to pay for your kitchen renovation. And if the job is done right, you can actually add value to your home, which essentially pays for the work itself. Talk with a trusted realtor to get some pointers about where to focus your renovation to get the most bang for your buck, and boost your ROI.