Many homebuyers are not properly prepared to shop and purchase. Shopping for a home can quickly turn into a very time consuming, disappointing, and expensive experience. Unfortunately, a large majority of homebuyers fall prey to at least one of these common and costly mistakes while shopping for a home. As a result, they end up paying too much for the home, or they lose their dream home to another buyer, or worse yet, they end up buying the wrong home for their needs.
There are nine common buyer traps when purchasing a home. If you are aware of them, you certainly can avoid them. Are any of these traps a part of your experience?
What price should you offer on the home you have just fell in love with? Is the seller’s asking price too high, or does it represent a true market value? If you fail to research the market in order to understand what comparable homes are selling for, you end up shooting in the dark when it comes time to make an offer. Without the knowledge of the home’s true market value, you could easily offer too much, or fail to make a competitive offer on a very excellent home. Ask your realtor to do a market analysis on the home you are about to place an offer on. Find out where it's value sits when compared to recently sold homes, those now in escrow, and those presently listed on the market.
What are you looking for in a home? A very simple question, but the answer can be quite complex. More often than not, buyers have been swept up in the emotion and excitement of the buying process only to find themselves the owner of a home that does not really fit their needs. Possibly the home is too small or too big. Maybe they are stuck with a longer than desired commute to work. Or, they have come to realize the dozen fix-ups that were so easy to take care are actually major time consuming projects. Now that the excitement has died down the fix-ups are something they just do not want to deal with. Step back. Take the time upfront to clearly define your wants and needs. Put them in writing. Then use the list as the criteria on which you will intelligently shop for a home.
Make sure your new home will have the title thoroughly checked during escrow, and that title insurance will be issued. This is a service that an escrow/title company will perform for you. Clear title will allow you to own the home free and clear of any encumbrances when escrow closes. During the escrow period you will receive a package in the mail from the escrow/title company that will include a preliminary title report. Check it carefully. The last thing you want to discover, especially in the final stages of a transaction, is that there are encumbrances on the property such as tax liens, undisclosed owners, easements, leases, or the like.
During your inspection period visit city hall and request to see the public file on the house you are about to purchase. You may find there are structural changes that are not permitted such as room additions, or other upgraded areas of the home. Possibly, a new fence of the neighbors sits just over the property line. Be very cautious of these issues. If you are in a rural area you may want to consider having a survey performed in order to clearly identify your boundaries.
Find out about the home's condition by conducting a thorough inspection early in the escrow process. Hire a certified home home inspector to objectively view the home inside and out. Make sure the purchase contract is contingent upon the inspector’s report. The inspector should present you a written report with photos that detail any area that will need attention or repairs. The buyer can then present to the seller a request for repair list. A typical purchase contract states that the buyer has 17 days to complete all buyer inspections on the home. According to California state laws, a seller must disclose all known material defects about the home they are selling. They are required to present to the buyer a set of written disclosures during the escrow period. However, don't expect sellers to know, or remember, every single physical detail and aspect of the home.
Receiving a pre-approval even before you shop is a must! When you have a pre-approved in your hand, you can shop with a greater sense of freedom and security. You will know which price range to shop within, and you will know what your future house payments will be. Contact a realtor you trust and ask if they can recommend a great mortgage lender to you. Seasoned agents will always possess a list of lenders they have had great success with over the years. Ask them to decribe their experiences with various lenders, and ask them who their favorite lender is, and why.
Make sure you identify and uncover all costs--large and small--far enough ahead of closing escrow. When receiving a pre-approval letter from your lender also request an estimated closing cost worksheet. After escrow is opened double-check that worksheet with the HUD1 closing cost statement issued by the title company. It is possible that some lenders and escrow companies may charge what is commonly called "junk fees." When you sign your loan docs at the close of escrow, again ask your escrow officer in detail what is being charged, and compare that with the originals you received from your lender, and from the escrow company. Remember, always, always, request an estimated closing cost worksheet when you receive a pre-approval letter from you lender. If a lender will not produce one ask why. If a satisfactory answer is not given seek the services of another lender. By federal law a lender must present an estimated closing cost statement to a client when requested.
When you sit down with your realtor make sure you know what you are signing. Go over each page of the contract very carefully with him or her. If your agent tells you closing costs will be paid half-and-half by seller and buyer, or a home warranty is a part of the sale, ask to see where it is in writing. Make sure your realtor checks proper boxes for loan and appraisal contingencies. It is a small check mark, but if missed it will allow terms in the contract to be stated that are not in your favor. In the worst case, it could cost you the home. And, always receive copies of everything you sign, including addendums, and requests for repairs. Keep an organized file so if issues arise during escrow you will be able to better discuss those items with your realtor over the phone. If there is something you do not understand simply ask. Your realtor will be able to answer.
Take your time during this critical part of the process, and insist on seeing all paperwork the day before you sign. Make sure all documentation perfectly reflects your understanding of the transaction, and that nothing has been added or subtracted. Is the interest rate correct? Are the closing costs correctly stated. Is everything covered? If you have any questions contact your lender, realtor, or escrow officer. If you rush this very important verifying process until the day of closing, you may run into a last minute snag that you cannot repair without compromising the terms of the transaction, the financing, or even the sale itself.
A systemized approach to the home buying process will help you steer clear of these common traps and will allow you to not only cut costs, but save you time and stess.
Want to know other common buyer traps to watch out for? There are more! Give me a call at (760) 382-1082 and let's talk further. Let's have a smooth and successful transaction from beginning to end and avoid these common pitfalls.