7 Buyer Traps and How to Avoid Them
“A systemised approach to the home buying process can help you steer clear of these common traps, allowing you to not only cut costs, but also secure the home that’s best for you.”
No matter which way you look at it, buying a home is a major investment. But for many homebuyers, it can be an even more expensive process than it needs to be since they fall prey to at least a few of the many common and costly mistakes which trap them into either:
- paying too much for the home they want, or
- losing their dream home to another buyer or,
- (worse) buying the wrong home for their needs.
A systemised approach to the home buying process can help you steer clear of these common traps, allowing you to not only cut costs, but also secure the home that’s best for you.
7 Buyer Traps
This important report discusses the 7 most common and costly homebuyer traps, how to identify them, and what you can do to avoid them:
1. Make Sure the Price is Right
What price should you offer when you bid on a home?
Is the seller’s asking price too high, or does it represent a great deal.
It can be easy to lose sight of your finances when weighing potential house prices, simply because the numbers involved are so big that they don’t feel like real money. If there’s an opportunity to push on price and get even a small discount, it can make a big difference.
Consider a house listed at £160,000 that you can negotiate down to £150,000. On one hand, you’ve only knocked off 6%, which hardly seems like a big deal. However, look at it from a different perspective. In addition to saving £10,000, you’ll save £1,000’s in interest costs on a 25-year mortgage.
If you fail to research the market in order to understand what comparable homes are selling for, making your offer would be like bidding blind. Without this knowledge of market value, you could easily bid too much, or fail to make a competitive offer at all on an excellent value.
2. Buying the Wrong Home
What are you looking for in a home? A simple enough 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 is either too big or too small. Maybe they’re stuck with a longer than desired commute to work, or more work than they really want to deal with now that the excitement has died down.
Don’t just rely on your initial visit to the property, which will often be during the daylight. Go back to the area a few more times: once after nightfall and once during rush hour. Get a good feel for the neighbourhood. This will give you a better idea of whether you’ll feel safe in the area, and how bearable the traffic and the noise will be.
Take the time upfront to clearly define your wants and needs. Put it in writing and then use it as a yard stick with which to measure every home you look at.
3. Survey or Home Report
As part of your offer to purchase, make sure you request an updated property survey or Home Report. Buying a house is probably the single largest investment you’ll ever make – learn how getting an up-to-date home inspection can help you get the most value for your home.
4. Undisclosed Fix-ups
Don’t expect every seller to own up to every physical detail that will need to be attended to. Both you and the seller are out to maximise your investment. Ensure that you conduct a thorough inspection of the home early in the process. Consider hiring an independent inspector to objectively view the home inside and out, and make the final contract contingent upon this inspector’s report. This inspector should be able to give you a report of any item that needs to be fixed with associated, approximate cost.
5. Not Getting a Mortgage in Principal Agreed
Pre-approval is fast, easy and free. Getting pre-approved for a mortgage is generally the first step you should take as a buyer. When you have a pre-approved mortgage, you can shop for your home with a greater sense of freedom and security, knowing that the money will be there when you find the home of your dreams.
Focus on your monthly Mortgage Payment, not the selling price. A common mistake that people often make is focusing on the total price of the home they can afford instead of the monthly payment they will be making. You may get approved for a £250,000 home, but figure out what you are comfortable paying each month. It is crucial that you work with an Independent Mortgage Adviser to understand how your deposit amount, credit, and the current mortgage rate affect your monthly payment.
6. Hidden Costs
Make sure you identify and uncover all costs – large and small – far enough ahead of time. When a transaction closes, you will sometimes find fees for this or that sneaking through after the “sub”-total fees such as loan disbursement charges, underwriting fees etc. Understand these in advance by having your lender project total charges for you in writing.
7. Rushing the Finance, Missives or Exchange of Contracts
Congratulations! You’re embarking on an exciting, new adventure – buying a new home! As you get ready to sign the papers and start living in your new home, it’s crucial that you don’t ignore some major missteps homebuyers have made in the past. Take your time during this critical part of the process, and insist on seeing all paperwork the day before you sign. Make sure this documentation perfectly reflects your understanding of the transaction, and that nothing has been added or subtracted. Is the interest rate right? Is everything covered? If you rush this process on the day of closing or concluding missives, you may run into a last minute snag that you can’t fix without compromising the terms of the deal, the financing, or even the sale itself.