19 May Common mistakes homebuyers make when purchasing a home
Buying a home is a big decision. Home is where we spend our lives, watch our children grow up, and create memories. For most people, it’s one of the biggest purchases you will ever make, so doing it right the first time is essential.
That being said, many homebuyers lack the information they need when purchasing a home. Common mistakes such as a lack of due diligence, bidding in the dark, or overlooking important flaws can result in a negative purchasing experience.
In fact, a study by Bankrate found that 63% of millennial homeowners have buyer’s remorse and the most common regrets come from not factoring in maintenance or hidden costs.
If you’re a first-time home buyer or just someone looking for a real estate change, it’s important to take your time and do your due process to ensure you make the right purchase. Below, we’ll outline what you need to know when buying a house and how to make the right decisions in an increasingly complicated real estate market.
5 common mistakes homebuyers make
While buying a home can be an exhilarating process, moving too quickly can mean missing crucial details. Sound real estate decisions take time, patience, and a critical mindset. If you lack experience, this process can be even trickier– no one is born knowing how to buy a house.
Here are a few of the most common mistakes homebuyers make when entering the process.
1. No due diligence
Due diligence means finding out everything you can about your potential home. We like to call this “doing your homework”.
Due diligence can include:
- Conducting an area and neighbourhood analysis
- Acquiring financial statements from previous owners
- Reviewing your own financing options
- Physical inspections
- Reviewing seller disclosures
- Talking to neighbours or tenants
- Discovering potential encroachments on the land
- Reviewing zoning laws in the area
- Getting an insurance quote
Traditionally, buyers are often left to do their own due diligence about the property they wish to purchase. Working with Precision Auctions, an Asset Disclosure Package (ADP) is provided to each buyer, which discloses all the relevant information like inspection report, zoning regulations, surveys, and red flag items to consider. The ADP may also outline optimization plans for parts of the property that could benefit from them. This allows buyers complete transparency throughout the process and mitigates future buyer’s remorse.
Remember: when buying a home, the physical condition is just as important as the financial condition. In fact, both factors can play a part in your own financial commitments to the home.
Other personal factors, such as neighbouring schools, amenities, commute times, and zoning restrictions should also be considered before you buy.
2. Bidding in the dark
In today’s modern market, real estate bidding wars have become the norm. Most prospective buyers have to accept the fact that they may end up paying 10-15% more than the high-end of their budget just to compete in the market.
The blind bidding process also moves quickly, which is detrimental to the time needed to make sound decisions. Because of this, many buyers involved in this process may feel pressured to forgo some requests for fear of losing the property.
To combat this issue, buyers should explore alternative options to blind biddings, such as real estate auctions or other transparent processes. If alternative options are not available, be clear with your real estate agent to ensure you have all necessary information before going forward with a purchase.
3. Overlooking important flaws
Jumping into a purchase too quickly can lead to overlooking important flaws or hidden costs in a home. Issues such as asbestos, plumbing repairs, electrical errors, and structural cracks can result in unseen huge costs for prospective buyers.
Traditional markets put the onus on the buyer to request information and inspections. Before committing to a purchase, request a home inspection by a certified building inspector. It is also advised to have specialists come in if you fear internal issues, as traditional building inspections are largely visual.
4. Being influenced by “The Market”
Prospective home buyers have a tendency to be influenced by “the market”, rather than their own needs.
While it may seem tempting to start the home buying process when you see prices on the rise, it’s important to remember that real estate markets are cyclical. Sometimes, the market prioritizes the buyer, and sometimes it is all about the seller.
Waiting for the right time, or not investing because you are worried about overspending, can lead to the same buyer’s remorse that comes from jumping in too quickly.
Generally, the best time to buy a house is when you are set up and ready to do so. If you have your budget, needs, and requests organized, there’s no reason to wait.
5. Offering too much
If you’ve finally found your dream home, you may be tempted to up your offer in order to stay above the competition.
But, offering too much can backfire on home buyers, as it can affect your mortgage loan qualifications. If your offer is too high, your mortgage broker may not approve your loan and you’ll have to pay the difference out of pocket.
If at some point you need to sell the home, due to loss of income or relocation, you may have to accept less than what you originally paid.
Instead of offering too much, homebuyers should determine their maximum budget before entering the buying process and stick to it. This budget should include closing costs, lender points, and repair and renovation, as well as the maximum monthly mortgage payment you can afford. Use this mortgage calculator to inform your decisions.
Before you buy, take your time
Buying a home is an exciting experience and many people will want to cash in on their dream home as soon as they get the chance. Competitive markets only further this desire, as fear of losing a bid drives buyers to make quick decisions.
Auctions can alleviate many of the mistakes homebuyers make by providing transparent and fair real estate processes for both buyers and sellers. Asset Disclosure Packages, motivated sellers, and transparent bidding processes create a more buyer-friendly process overall.