Bob Bruss, as usual, has some great advice for home buyers in today’s Inman Real Estae News. I thought I’d share the highlights with you:
Home buyers: 5 costly mistakes to avoid
Satisfaction ensured with own agent, key contingencies
1. FAILURE TO GET PRE-APPROVED IN WRITING FOR A HOME MORTGAGE. Most home buyers need to obtain a home loan to purchase their house or condo. Smart buyers shop for a mortgage before searching for a home.
Although it’s fun to “shop” for a house or condo on the Internet — where more than 70 percent of today’s home buyers begin their quest (according to the National Association of Realtors) — the smartest home buyers get pre-approved in writing by an actual lender so they know the maximum mortgage amount available.
2. FORGET TO WORK WITH YOUR OWN BUYER’S AGENT. The second major mistake some home buyers make is they forget they need their own buyer’s agent. It’s very easy for prospective buyers visiting weekend open houses to let the listing agent they meet prepare the purchase offer.
Whether that listing agent acts as a “dual agent” representing both the home seller and buyer (an inherent conflict of interest) or the listing agent represents only the seller (and nobody represents the buyer), such a situation is not in the home buyer’s best interest.
It costs home buyers nothing extra to have their own buyer’s agent. If the home is listed for sale, the listing agent will split the sales commission with the buyer’s agent. In the rare situation of a “for sale by owner” home, most FSBO (fizz-bo) sellers are only too happy to pay the buyer’s agent half of a customary sales commission, usually 3 percent.
3. BUY A HOME WITH AN INCURABLE DEFECT. In the current buyer’s market in most communities, where there are more home sellers than qualified buyers, house and condo buyers can afford to take their time and be “picky.”
No home is perfect. Even brand-new houses and condos have their defects. Thankfully, most homes don’t have major defects, such as being located next to a noisy railroad track or a freeway. Smart buyers think into the future and ask, “Will I have any trouble selling this home because of its problems?”
Serious incurable defects are called “economic obsolescence” by appraisers. Examples include a bad floor plan, poor location (such as adjacent to high-voltage power lines or the city dump), noisy street traffic, or lack of onsite parking.
4. FAIL TO INSIST ON A COMPARATIVE MARKET ANALYSIS (CMA) BEFORE MAKING A PURCHASE OFFER. Amazingly, many home buyers still follow the old rule: “Offer 5 percent below the asking price.” That makes no sense.
Instead, smart home buyers ask their buyer’s agent to prepare a written comparative market analysis (CMA) before making a purchase offer. This CMA is the same form the listing agent prepared for the home seller.
It shows recent sales prices of comparable nearby homes, asking prices of similar neighborhood listed residences, and the asking prices of recently expired competitive listings (usually overpriced)
5. NEGLECT TO INCLUDE TWO KEY CONTINGENCY CLAUSES. Way back in the hot home seller’s markets of 2005 and 2004, it was common for home buyers to make “all cash, no contingency” purchase offers. The current buyer’s market in most cities has changed that foolishness.
Today’s smart home buyers include at least two purchase-offer contingencies: (a) a satisfactory lender’s professional appraisal of the home for at least the purchase price, and (b) the buyer’s approval of a professional inspection report to be obtained at the buyer’s expense.
Benjamin Bach is a Real Estate Consultant with Keller Williams Golden Triangle Realty in Kitchener Waterloo dedicated to building wealth for his clients through smart Real Estate investments, and helping people achieve success. If you are interested in how you can start your Real Estate portfolio, or have any questions and buying or selling a home, you can email Benjamin (benjamin AT benjaminbach.com) or reach him at 519 772 4376.