Have you decided to buy your first home? Avoid the five most common pitfalls that lie in wait, and could turn your dream of home ownership into a nightmare.
1) You need to get the house inspected. Ever since the boom in the home inspection industry started in the 1980s, many states require that home inspectors at least be licensed, and many require they receive special training to get the license. Ask to see their license, and ask for a list of their clients from six months ago for you to call. Note I said from 6 months ago – not last week. You want to assess whether or not the inspector actually found the problems that have surfaced for the buyer. Most problems with a property will surface in that short time.
2) Use a reputable appraiser - of your choosing. Appraisers are licensed real estate professionals familiar with the local market, but their skills vary as do their loyalties. Get suggestions from the real estate agent, but use caution. The agent is working for the seller, not you! Also, make sure any appraiser the agent suggests is acceptable to the lender you will be working with. Choosing the wrong appraiser could force you to come up with more cash than you had planned, or you could wind up having to get a second appraisal because a particular appraiser’s credentials are not acceptable to the mortgage lender.
3) Budget wisely! Many first-time home buyers do not realize the hidden costs of owning a house. 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. Invest that amount away every year in a liquid fund, like a mutual fund or short-term CD. You don’t want to be left in the cold when the furnace goes out and needs to be replaced.
4) Do not offer full price. This may seem like common sense, but many people do so only to discover they will have to come up with a larger down payment than they expected. Keep in mind, the price of the house was set 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, who has access to sales records indicating what the actual value of the house will be on the open market. Also to bear in mind - 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) 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 they go on the market before a buyer is found, so you can look around and possibly find one you’ll like even better. The longer a house sits on the market, the more likely it is that the seller will accept a less-than-full-price offer.
Research the neighborhood. Get crime statistics from the police department. If you have children going to public school, look closely at the school choices and how the district meanders, and make sure that the house you are purchasing actually lies within the district.
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.
By avoiding these common mistakes, you can find the right house for you and your family, and make owning your own home a joy versus a disaster.
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