Buying a home can be one of the most exciting and rewarding times of your life or it can be a roller-coaster ride of financial and emotional devastation. It all depends on what you do and what you do, all depends on what you know. Most homebuyers do not have enough accurate knowledge or they are ill-informed.
Here are the 13 worst mistakes made by homebuyers and how to avoid them, making your home buying a fulfilling experience.
- Exceeding your future financial limits
- Buying what you want instead of what you need
- Ignoring the extra costs & the hidden costs
- Failing to research the area
- Tolerating poor service from agents
- Taking the bait about the quoted price
- Losing money with auctions
- Being unprepared for gazumping
- Being too ‘clever’ with an offer
- Not getting independent inspections & advice
- Being too quick or being too slow
- Being caught by an investment scam
- Failing to complain
The most important financial question to ask yourself, before you buy a home is “what’s the worst that can happen?” When answering this, you need to consider situations such as interest rates rising or losing an income.
Think of the future – your financial limit today will rarely be the same as your financial limit in the future. Sure, it might be better. But what if it’s not? What if things get worse? Play it safe. Make sure that when you buy a home, you will be able to keep your home.
There are two kinds of buyers: those who buy what they want and those who buy what they need. The public world of materialism is often a private world of financial stress. Do you need four or five bedrooms? Do you need to live in the ‘best’ area? Have you considered buying a better home in a less expensive/prestigious area?
What’s more important – struggling to maintain an image of wealth or living safely within your means? Most buyers could save tens, even hundreds, of thousands of dollars by buying what they need instead of what they want.
The extra costs of buying a home can add as much as 10% to your purchase price. In some states, the government stamp duty can be as high as 6% of the house price. And then there are the hidden costs of ownership – rates, taxes, insurance and maintenance. These can add up to thousands of dollars – all of which are constant costs.
The price you pay for your home is not your final cost, so be aware of the extras and make sure you can afford them.
After you buy, there are few things worse than discovering you could have bought better. If you intend to live in your home for many years, take some time to research the area before you buy – visit the surroundings to make sure you like it and check the prices of recent sales in the area.
When you find the home you love, do not be shy about inspecting it more than once. The more you see a home before you buy, the more you will know if it is the right home for you. And, finally, check out the neighbours.
Before you find the right home, find the right agent – one who will listen to you and is prepared to help you look for the perfect home. Sure, agents are paid by sellers, but this is no excuse for the widespread apathy, deceit and rudeness shown towards buyers.
Not all agents are the same. Try to find one who will sit down and discuss your needs with you. It is a mistake to think you have to tolerate poor service. An agent who is courteous and caring will make all the difference to you.
One of the most unethical tricks in real estate is advertising a home at a price well below its real price. Thousands of buyers get their hopes up, only to discover the home they love was never in their price range. Advertisements which say ‘price range,’ ‘offers above’ or ‘bidding to start from’ are usually misleading.
Many agents will use the excuse of the market to cover their lies. Be very careful – financially and emotionally – when you see quotes about likely selling prices. Most times, it is just a bait to lure you. Take the bait and you will almost certainly get hurt in one way or another.
While you can often buy at a lower price with auctions, your challenge is discovering the truth about the likely selling price. At auctions, thousands of home buyers lose money through legal and inspection costs for homes they never had a chance of buying. When they realise they have been tricked it breaks their hearts.
Unless you know what you are doing, it may be best to forget about buying at auction. If you must bid at auction, at least make sure you educate yourself about the process and techniques involved.
Sometimes after you make an offer and it is verbally accepted, another buyer will offer more and this is gazumping. No matter what you are told, you have never legally purchased a home until both you and the owner sign a legally binding contract. Until this happens, remember five words: Don’t Get Your Hopes Up.
One way to reduce the risk of being gazumped is to meet the owners. At the very least, ask the agent to confirm that if another buyer makes an offer higher than yours, you will be given the chance to increase your offer before the home is sold to the other buyer.
If you decide to make an offer for a home you like, be aware that the lower your offer, the less chance you will have of buying the home. Often it is best to make one offer – your best offer. Make it in writing and state you either cannot or will not pay any more. Be careful playing the ‘bluffing’ game, it can easily backfire on you.
Decide which is more important – the home you love or the price you will pay. You do not have to pay more than you can afford, just do not be too clever or else you may miss the chance to buy the home you love.
It is essential – for your financial and emotional safety – that you obtain an independent building inspection report. Be sure you discover any major faults before you buy the home. The biggest word to remember is ‘independent.’ Be careful using anyone recommended by the agent as some agents receive kickbacks from advisors they recommend.
Also, be sure to get legal advice before you sign anything. It is madness to make one of the biggest financial decisions of your life without independent advice. If in doubt about the price, consider obtaining a valuation. The hundreds of dollars you spend could easily save you thousands of dollars.
The right time to buy is when you find the best home for you at a price you can afford. This can happen on the first day you start looking or it can take weeks, even months, of painstaking effort. Do not hesitate to buy if you find the right home, but, also, do not be pushed into making a hasty decision.
No matter what you might think, you will always find another home. Take the time to make sure everything feels right and that everything checks out. Whenever this happens, be it on the first day or after several weeks, it is then the right time to buy.
Despite all the negative publicity, thousands of consumers are caught with investment scams. Be very wary of free offers, such as investment seminars or trips to inspect property in distant areas. No matter how good these offers seem, many are a nasty con where consumers are tricked into buying properties at hugely inflated prices.
Often, it is not until they try to sell that they discover how badly they have been duped. Be aware of anyone who is trying to sell you something because it is a “good investment” or it has “tax benefits” or a “guarantee.” Do your research and do not sign anything without getting independent advice.
If you have a bad real estate experience you must complain. Often the louder you complain the more chance you will have of being compensated. At the very least, you will be helping other buyers to avoid making the same mistakes. Remember that real estate institutes represent real estate agents not consumers, so it is best to complain to your lawyer, the Department of Fair Trading or the ACCC.