You’re reaching for the dream, and have decided to buy that first home. Be sure to avoid the five pitfalls that lie in wait, and could turn that dream into a nightmare.
1) Get the house inspected. Ever since the boom in this industry started in the 1980s, many states now require that home inspectors receive specialized training and be licensed. Ask to see the home inspector’s license, and get a list of five of his clients from six months ago for you to call. Most problems with a property will surface in that short time.
2) Get the house appraised by a reputable appraiser of your choosing. Appraisers are usually licensed real estate professionals familiar with the local market. Do not trust that the agent you’re working with will choose one best for you, they are working for the seller, not you! Get a list of potential appraisers from the mortgage lender you’re working with who are acceptable to the lender.
3) Budget accordingly! Many people do not realize the hidden costs of owning a home. You should plan on a minimum of five percent of your gross (pre-tax) income being devoted to the maintenance and upkeep of the home, whether the home is new or existing. Sock that many away every year, or when your furnace goes out, you’ll be left out in the cold.
4) Don’t offer full price. The price of the home has probably been set at a price anywhere from five to 15 percent higher than the seller is willing to accept. This is especially true if there is a real estate agent working with the seller, because they have access to sales records giving a good indicator of what the actual value of the house on the open market will be. Also, the agent has a hidden psychological motivation to pressure the seller into accepting a reasonable price, since they only get paid when the house sells.
5) Shop Shop Shop! Do your homework! The first house you see may seem to be your ‘dream’ home, but take your time. Most homes take roughly ninety days from the time it goes on the market to the time a buyer is found, so you can look around and possibly find one you’ll like even better.
Do your homework on the neighborhood. Ask the police department for crime statistics. If you have children, check closely what the school choices are. Also check for the availability and accessibility of essential services, such as groceries, pharmacies, etc. If it is a rural property, find out the condition of the well and septic system.
The longer a house sits on the market, the more likely it is that the seller will accept a less-than-full-price offer. As a first time home buyer, you don't want to buy more than you can afford, and you don't want to make mistakes that could leave you stranded if you make the wrong decision.
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