Selling a home is undoubtedly an expensive endeavor, but it can be even more costly if you go it alone. Without the help of a real estate agent, you could find yourself making some expensive mistakes and missing out on lucrative opportunities.

Sure, agents charge commissions, which is the main reason why sellers might consider selling their homes on their own. But there are plenty of reasons why they shouldn’t, and here are just a few.

1. You’ll Waste a Lot of Time

Selling real estate is a full-time job. It’s not something that can be easily or successfully done when doing it a few hours on the weekend or whenever you have the time. Instead, selling homes requires full-time attention, which you likely don’t have time for.

It’s a widely-held misconception that selling properties is just a simple matter of putting up a few images and description of the property online and waiting for the offers to roll in.

Instead, selling real estate requires a lot more time and effort than the average person may not realize. There is a ton of work that goes on behind the scenes, and it can be extremely time-consuming.

Unless you are a full-time agent yourself, you likely won’t have enough time in your schedule to dedicate to all the ins and outs of selling your home. In this case, your best bet is to leave it to the professionals to handle it for you.

2. You Might Not Present Your Home Appropriately

It’s one thing to clean up your house and keep it tidy while it’s on the market, but it’s quite another to understand the buyers in your area and know what they’re looking for in a home. Professionals know the buyer demographic in the areas they work in. Using that information, they can effectively guide homeowners in prepping their homes in such a way that it is more attractive to a larger pool of buyers.

At the very least, your home should be neutralized and de-personalized, which means eliminating any personal artifacts and decorating in colors that more buyers would be attracted to. Real estate agents either know how to do this on their own or have connections with professional home stagers who do this job for them.

As a home seller, will you know exactly what to do to make a positive impression on buyers? If not, you’d be better off having a seasoned realtor help you to ensure this impression is a good one.

3. You’ll Have Far Less Marketing Reach

How exactly will you get the word out there that your home is listed for sale? Sure, you can put some images on free websites out there, or even paid ones. But are you able to advertise your home across several websites and social media channels to attract buyers and their agents on a local and even national level? 

Real estate agents have the knowledge and experience with using specific marketing tactics and analytics to ensure your listing is communicated to a targeted audience. They’ll know which type of print media would be appropriate for your listing in order to maximize every advertising dollar spent. They’ll know exactly which type of images will produce the greatest amount of attention.

Real estate agents are also able to access to the Multiple Listing Service (MLS), which is a database of properties on the market. It’s managed for real estate agents, by real estate agents who pay a fee to have access to it. The MLS offers the largest database of homes on the market, and since all paying realtors have access to it, your property will get a lot of attention if you are represented by a realtor.

If you go it alone, your marketing reach will suffer a great deal, which can have a negative impact on your ability to find the right buyer who is willing to pay what your home is worth.

4. You’ll Miss Out on an Agent’s Extensive Network

Agents know other agents. They might know of an agent who is representing a buyer looking for a home just like yours. They’ve always got their fingers on the pulse of what’s happening in your market and can use the connections they have with other professionals in the industry to help make a sale happen.

Real estate agents also network with related experts in the field, such as photographers, home stagers, lawyers, home inspectors, contractors, and mortgage specialists who can all play a role in a real estate transaction.

If you don’t work with an agent, you’d likely be missing out on this extensive network of professionals that can make your sale a lot smoother.

5. Your Emotions May Get in the Way

It’s not uncommon for sellers to be emotionally charged when selling their properties. Many sellers have a tough time detaching themselves from their homes, and these emotions can get in the way of a successfully negotiated deal.

To sellers, properties are homes where they’ve built memories. Dealing with the emotions involved in putting their home on the market can prove to be difficult.

If you allow your emotions to get the better of you, it’s possible that the sale of your home will suffer. That’s why it’s always best to have a professional real estate agent act as a buffer between you and the buyer. That way all negotiations will be handled in a professional manner without allowing any emotions to cloud the process. 

6. Your Negotiation Skills May Not Be Enough

Once you receive an offer from a willing buyer, will you know how to respond to it? Will you know what to look for in an offer to make sure it’s a good one? Are you savvy when it comes to working with buyers and knowing what it takes to ensure a meeting of the minds?

This is where a seasoned real estate professional can be extremely useful. Agents have the skills and experience negotiating real estate deals to make sure their clients’ best interests are protected while working with buyers’ needs to result in a successful deal. Negotiations can be an intricate process, which is why you’d be in a better position if you have an agent working in your corner to achieve the outcome you’re looking for. 

7. Your Listing Price May Not Reflect the Current Market

As a seller, you obviously want the most money for your home, but you’re not going to get it just by listing your home at a random high price. Getting top dollar for your home requires careful strategies, one of which includes choosing the right listing price. In fact, it’s the listing price that plays the most important role in a real estate transaction.

If you price too high, you’ll scare off prospective buyers. In turn, your home will sit on the market, wasting valuable time. The longer it sits on the market, the more of a stigma it will gain. Buyers will start to wonder what’s wrong with the home, and you may be forced to reduce your listing price at some point in the future.

That’s why picking the right asking price is so important. Do you know how to come up with the right price? What type of resources will you look at to help you determine this crucial number?

It’s not enough to simply look at what other homes in the area are currently listed at. What they’re asking for doesn’t necessarily reflect how much they will realistically get. Not only that, you need to make sure you’re comparing apples to apples, as the listing price of a home that’s dissimilar to yours won’t give you much to go on.

Real estate agents will be able to conduct research on similar homes in the area that have recently sold to come up with a listing price that accurately reflects the current market. By doing so, you’ll be in a better position to attract prospective buyers in your area and sell your home sooner rather than later.

The Bottom Line

Going solo when selling your home is a big mistake, and you’ll likely realize that shortly after listing without an agent. Trying to sell your home without a professional isn’t the best way to try to save some money on real estate commissions. Instead, a real estate agent can be your best ally when it comes to getting the most out of your transaction.

Borrowers have plenty of options when it comes to the type of mortgage they can take out to finance a home purchase. Among them all, home loans backed by the U.S. Federal Housing Administration (FHA) are often quite popular since their requirements tend to be less stringent compared to conventional mortgages.

But before you take out an FHA loan, it’s important to get acquainted with them first. Here are a few things you should know about FHA mortgages before applying for one.

1. They’re Available to Everyone

FHA loans are not just for first-time homebuyers or people who can’t come up with a 20% down payment. They’re available for anyone who wants to take advantage of them. Even those who have bought and sold many times in the past or make a decent income may be eligible for an FHA-backed home loan, as long as they meet the requirements needed to get approved for this type of mortgage.

FHA home loans are simply mortgages that are guaranteed and insured by the U.S. Federal Housing Administration. Such insurance gives lenders the assurance that the loans they provide will be paid back if borrowers default on them.

2. Minimum Down Payment Requirement is 3.5%

While conventional loans require a minimum down payment of 5% of the purchase price, FHA loans require at least 3.5% in most cases. The option to pay a smaller down payment makes FHA loans very attractive to many borrowers who may otherwise struggle to come up with a sizeable lump sum.

That said, there may be some cases where a slightly higher down payment amount may be required based on credit history and the type of home being purchased.

3. Your Lender Needs to Be FHA-Approved

Not all mortgage lenders are able to provide FHA-backed mortgages. The FHA doesn’t actually lend money, but only insures the loans. Lenders are the ones loaning out funds to borrowers, so they must be FHA-approved before they are able to offer these types of mortgages.

If you’re interested in an FHA loan to finance a home purchase, it’s important to seek out lenders who are approved to provide loans insured by this federal entity.

4. The Property Must Meet Minimum Standards

The FHA will only insure mortgages for properties that meet specific criteria. An inspection will be done to ensure that properties meet certain standards, including the following:

• The home should be deemed safe for habitation;
• The home should be secure;
• The home should be absent of any physical conditions and flaws that could compromise the structure.

Many conditions with a property can make it ineligible for FHA loan qualification, such as:

• Evidence of lead-based paint, asbestos, mold, or other hazard;
• Severely cracked windows
• Missing handrails
• Leaky roof
• Outdated electrical wiring
• No running water
• Warped floors
• Inadequate heating and cooling system

This list is by no means exhaustive. There are plenty of things that can deem a home ineligible for FHA loan approval. Essentially, if a home is not considered to be safe, secure, or structurally sound, it will likely not be FHA-approved.

5. Two Mortgage Insurance Fees Are Required

Borrowers who put less than 20% down on a conventional mortgage have to pay private mortgage insurance (PMI) premiums. This insurance is meant to protect lenders in case borrowers default on their mortgage payments.

With FHA-backed loans, there are two mortgage insurance premiums that have to be paid. The first premium is paid when the loan is taken out, and costs 1.75% of the loan amount, no matter how much of a down payment is made.

The second premium is paid on a monthly basis. The amount paid depends on the loan amount, length of the mortgage, and the borrower’s loan-to-value ratio (LTV). Generally speaking, the MIP costs anywhere between 0.45% to 0.85% of the base loan amount.

6. You Can Still Qualify With a Low Credit Score

One of the most attractive features of FHA loans is that they do not require stellar credit to be approved for. Borrowers with a score of 580 and higher can be approved with just 3.5% down.

According to credit reporting bureau Experian, about 30% of Americans have a credit score under 601, which is considered the threshold between fair and bad credit. For these people, securing a conventional mortgage would prove to be very difficult, if not impossible.

FHA loans have lower credit requirements compared to traditional loan types. Even those with a score of 500 may even be approved for an FHA home loan, albeit with a higher down payment amount (typically 10%).

Having said that, applying with a higher credit score will increase the odds of loan approval, which is why it’s recommended that borrowers take steps to improve their scores before they apply for a mortgage, regardless of type.

7. You Might Not Have to Pay For Closing Costs

Closing costs often need to be paid upfront by buyers when a real estate deal closes. These are additional costs that buyers need to budget for when purchasing a home. However, they may not always have to worry about paying closing costs up front with an FHA loan.

Oftentimes a large proportion of closing costs are covered by sellers, lenders, and builders. Even if closing costs are not covered, buyers can still take advantage of having them rolled into their mortgages so they don’t have to come up with the funds in one lump sum. Borrowers should note, however, that lenders who cover part of the closing costs may charge a higher interest rate in exchange.

8. There’s a Limit to How Much You Can Borrow

FHA loan limits have recently changed and now range from $294,515 in areas with lower-priced homes to $679,650 in higher-cost areas.

The Bottom Line

FHA loans certainly offer a number of advantages to borrowers, especially those with a less-than-perfect credit score who aren’t able to come up with the minimum down payment amount required for conventional loans.

But as with any other type of mortgage, it’s recommended that you do your homework and understand why home loan types are out there to see which one is best suited for you. Consult with your mortgage specialist to determine whether or not an FHA loan is the right option for your financial situation.

Buying a home is undoubtedly a massive purchase that requires a substantial amount of money up front in the form of a down payment. But it can be tough to come up with a lump sum of money. As such, many homebuyers choose to buy homes with minimum down payment amounts, such as 5% down, 3.5% down, and even 0% down in some cases.

But there are a number of benefits associated with coming up with a larger down payment. By putting 20% down on a home purchase, you’ll have plenty of benefits to take advantage of. Here are some reasons why coming up with a large down payment for a home purchase will work to your advantage.

1. Avoid Paying Private Mortgage Insurance (PMI)

If your down payment is less than 20% (for a conventional mortgage), you’ll need to pay Private Mortgage Insurance (PMI). This amount is typically added to the monthly mortgage payment and is required by lenders to reduce their risk should you ever default on your loan payments.

This can be a big chunk of money added to your monthly payments. The amount added to your payments will range from 0.5% to 1% of the property value annually, depending on how much you actually put down. This can add up to thousands of dollars spent on mortgage insurance every year.

For instance, you could be paying as much as $3,000 a year – or $250 a month – based on a 1% PMI fee on a $300,000 mortgage. That’s a lot of money, and can add up very quickly over the term of your mortgage. If you’re able to come up with a hefty 20% down payment, you could be saving all that money year after year.

2. Reduce the Loan Amount

The less you have to borrow, the less you have to pay back. It’s that simple. You can effectively reduce the amount of money you need to borrow to finance a home purchase by coming up with a larger down payment. And the less money you have to take out, the smaller your monthly payments will be.

Let’s say you agree to buy a home for $500,000. If you put down 20% – or $100,000 – you’d have to borrow $400,000. If, on the other hand, you only put down 5% – or $25,000 – you’d have to borrow $475,000.

A $400,000 mortgage at 4% (assuming a 5-year, fixed-rate mortgage) would translate into monthly payments of $2,326.42, while a $475,000 mortgage with the same rate and terms would require $2,762.62 in monthly payments. That’s a difference of $436.20 per month, or $5,234.40 a year.

Borrowing less money obviously means that you’ll have less to pay back, leaving you with more money left over to spend on other things, including saving up for retirement.

3. Pay Your Mortgage Off Faster

Nobody wants to may a mortgage forever. That’s usually not the plan. Every mortgage is set up so that there is an end date at which point the entire mortgage amount will be paid off in full. It should be your goal to pay off your mortgage at some point in the future; ideally, the sooner the better.

Imagine the savings you’d realize if you no longer have a mortgage to pay. All that money going towards those mortgage payments could be put to much better use.

You can realistically pay off your mortgage a lot faster if you have less money to pay back. By putting down a significant down payment, you can effectively reduce the amount you need to borrow and subsequently reduce the amount of time needed to fully repay your mortgage balance.

4. Increase Chances of Mortgage Approval

Coming up with a large down payment shows lenders that you have the financial capacity to afford a home purchase. Not only does a big down payment amount reduce the amount you have to borrow, it also shows lenders that you’re able to save, which goes a long way for your creditworthiness.

Since a higher down payment reduces the loan amount, your loan-to-value ratio (LTV) will be lower. Lenders use your LTV for lending risk assessment purposes before approving or rejecting a mortgage. It basically represents the total loan amount relative to the value of the home you agreed to purchase. If your loan amount is a lot lower than the property value, your LTV will also be lower, which makes you less of perceived risk to a lender.

Ultimately, a larger down payment can help boost your odds of mortgage approval, which is exactly what you’re aiming for.

5. Improve the Chances of Getting a Better Interest Rate

In addition to increasing the chances of getting approved for a home loan, a larger down payment can also help you secure a lower interest rate. Lenders tend to offer lower rates to borrowers who present less of a risk to them, and coming up with a big down payment can place you in that category.

Lenders prefer to lend to borrowers who take out smaller mortgages. That’s because they’ll have a better chance of selling the property for more than what was borrowed should the borrower default and end up in foreclosure. As such, lenders will usually offer low-risk borrowers a better interest rate, and a lower rate can translate into tens of thousands of dollars in savings over the life of the loan.

For instance, a 4% interest rate on a $400,000 mortgage will require far less interest payments than a 6% rate on the same loan amount. At the end of a 25-year amortization period, you would have paid $372,927 based on a 6% interest rate compared to $233,309 with a 4% rate. That’s a difference of $139,618!

There’s no doubt that a lower interest rate can save you a ton of money at the end of the day, and a bigger down payment can certainly help.

6. Boost the Odds of Winning a Bidding War

The California real estate market continues to sizzle, and as such, multiple-offer situations are the norm. If you find yourself in this position as a buyer, you’ll need to ensure that every aspect of your offer is as strong as can be in order to come out the winner. While there are plenty of important factors that go into a strong offer, one of them is a large down payment.

Sellers will likely look favorably on bidders who are able to come up with a sizeable amount of money to be put towards the purchase price of the home. It shows a level of seriousness to buy, as well as the financial capability to secure a mortgage.

Failure to secure a mortgage is one of the biggest reasons why real estate deals fall through, and sellers don’t want to risk ending up having to get back in the market after a failed transaction. If you’re able to come up with a bigger down payment, you’ll be perceived as a strong buyer in the eyes of a seller, which can be particularly beneficial during bidding wars.

The Bottom Line

There are obvious financial perks that come with larger down payment amounts. Ultimately, you’ll be able to increase the odds of securing a mortgage, pay less every month, and pay your mortgage off faster. Of course, saving up for a hefty down payment can take a while, but it might be worth the time and effort based on the benefits you’ll be able to afford.

There are obvious perks to buying a brand new home; namely, new materials, the ability to customize to your liking, and the potential to buy at pre-construction prices. But as convenient as new home construction may be, there are certain things that buyers should be wary of when buying a new home from a builder.

Understanding all the ins and outs of buying pre-construction can help you make a more informed decision before being bound by the contract.

1. You’ll Need a Hefty Down Payment

When you purchase a resale home on the market, you can put as little as 5% down for a conventional mortgage (with private mortgage insurance), and even 3.5% for government-backed mortgages. But buying new home construction with a builder will require you to put a bigger down payment towards your purchase, typically as much as 20% or more of the final purchase price.

That said, the down payment isn’t usually due all at once. Typically, builders require buyers to submit a 5% deposit upfront, then pay the remainder in increments over the course of the next year or two. If you’re buying new home construction, be prepared to dish out a larger down payment for the property.

2. Delays Are Commonplace

When you buy a new home with a builder, your contract should stipulate the completion date of construction. However, it’s very common for these completion dates to get pushed out a few times and by several months or more.

It should be no surprise that anything can happen to cause delays in the completion of construction. Even still, delays can be frustrating for buyers who have already made plans to move in by a certain date.

While delays with new builds are common, it would still be in your best interests to do some research on the builders that you’re considering buying from to see which ones have a habit of experiencing delays versus those who are pretty good at sticking to their schedules. Some builders are just better than others at foreseeing potential delays and taking steps to reduce their occurrences.

3. There Could Be Hidden Costs Involved

In addition to the deposit and purchase price spelled out in the purchase contract, be wary of plenty of other hidden fees that might not come up until well into construction. It’s possible for buyers to get hit with a ton of surprise closing costs, such as development charges and levies. These extra expenses can cause the overall price to soar.

Do your best to be diligent when inquiring about any extra charges that are likely to pop up right before closing so you can budget appropriately. If possible, set a limit of how much you are comfortable with paying from the onset so you don’t wind up stuck with a contract that will cost you more than what you expected. Ideally, these extra fees shouldn’t end up costing you any more than 2% of the purchase price.

4. Model Homes Are Usually Filled With Upgrades

The model home is probably what prompted you to buy from the builder, thanks to all the fancy upgrades and finishes that are typically used to create a stunning home. But don’t be lured into making a purchase after being mesmerized by the model home. Many of the finishes used in model homes are upgrades, which means they’ll cost extra.

Find out exactly what finishes and materials come standard with the home purchase versus those that are considered an upgrade and will require additional expenditures. It’s crucial that you fully understand what you’ll be getting with the base price and how much you would have to spend to get certain finishes that don’t come standard. Calculate exactly how much any upgrades will end up costing you so you work with a price that you’re comfortable with and won’t be unpleasantly surprised.

5. Builders Don’t Like to Negotiate on Price

It’s commonplace for buyers and sellers to negotiate on the price of resale homes, but builders typically expect to be paid the quoted price of their homes. They’re not in the habit of wheeling and dealing with buyers, because if they do, that will open the floodgates to more negotiations with future buyers, which they would much rather avoid.

That said, you can still try to lower the overall cost of the home purchase by asking the builder to cover some closing costs or throw in an upgrade or two. Builders may be more open to negotiating in this way while still keeping the purchase price as is.

6. The Home Should Be Inspected When Complete

Just because you’re buying a brand new home doesn’t mean it shouldn’t be inspected before you take possession. Even though new homes are often required to pass inspections from the municipality, you might want to bring in your own home inspector to check the place out in addition to the final walk-through that builders generally allow just before closing.

7. Not All Warranties Are All-Encompassing

New homes usually come with a warranty from the builder, but that doesn’t mean that the warranty you get covers absolutely everything. Many components of new homes come with their own warranties from contractors and manufacturers, such as those for windows, doors, HVAC systems, and so forth. In this case, you’d have to deal with third parties if issues arise. It’s important to find out exactly what is covered and when those warranties expire. 

8. Other Surrounding Developments Can Pop Up in the Future

Just because there may be greenspace surrounding the home you buy today doesn’t mean there won’t be other structures built some time in the future. Be aware that future developments surrounding your home and subdivision can be built, which could impact your enjoyment of your home if you’re not prepared.

Builders don’t necessarily have to tell you about what plans might be in the forecast, so it’s up to you to either find out if there are plans in the works for other developments or simply accept whatever pops up in the near future.

9. You Should Get Your Own Real Estate Agent

Builders typically have their own team of agents who are responsible for sealing the deal with buyers, but that doesn’t mean you have to go in it alone. Instead, you’d be well-advised to hire your own real estate agent to represent you in order to ensure the contract you enter is a sound one. The builder’s agents represent the builder, not you. That’s why you should have your own representation to look after your best interests.

A real estate agent can guide you about which features you might want to add for resale purposes. They’ll also be able to help you identify which features come standard versus those that are upgrades and come at an additional cost.

The Bottom Line

Buying a brand new home from a builder can afford you with the benefit of being able to customize the home to your tastes and not have to worry about repairing or replacing any materials or systems anytime soon. It’s also a great opportunity to buy at pre-construction prices and build some equity by the time the closing date arrives.

But buying pre-construction doesn’t come without its downsides. The earlier you’re made aware of certain potentially negative aspects of buying pre-construction, the better able you’ll be to make a sound buying decision.