Homebuyers routinely make costly mistakes when buying a home. Here are six costly mistakes made by homebuyers that can easily be avoided.

Mistake #1: Not Taking a Look at Your Credit Report

Home buyers often wait until they have a home under contract or until they apply for a mortgage to have their credit reports pulled . Getting a copy of your credit reports and credit scores early in the process is an absolute must.

Under the FACT Act, you are entitled to free credit reports from each of the three credit reporting repositories – Equifax, Experian, and Trans Union. These are available at annualcreditreport.com

Mistake #2: Not Getting Pre-Approved For Financing

You need to know how much of a loan you plan on getting given your desired monthly mortgage payment and compare that to property available in that price range to see if you are comfortable with what you get for your money. Why get pre-approved? To make you a better buyer in the eyes of the seller , thus giving you greater leverage in negotiating for the best price and terms as well as knowing that you can afford and obtain a loan .

Mistake #3: Not Having a Clear Idea of One’s Needs and Wants

Once a buyer has a clear understanding of loan options and their price range they need to have a clear idea of what they want . Too many buyers just go out looking at homes without a clear understanding of what they really want .

Mistake #4: Not Working With the Best Agent

Home buyers can work with agents who represent the seller , agents who represent the buyer, or agents who try to represent both the seller and the buyer (known as dual or designated agents) or agents who represent neither the home owner or the buyer (known as transactional brokers or facilitators).

Agents owe fiduciary duties, client level services to their clients. As a buyer you should seek out the services of a real estate agent who will guarantee to give you these full duties no matter which home you are interested in. These duties include: Confidentiality, Accountability, Reasonable Skill and Care, Undivided Loyalty, Obedience to Lawful Instruction, Advocacy and Disclosure of all material facts pertaining to your purchase.

Working with an exclusive buyer’s agent is best. A true exclusive buyer’s agent : never takes listings; never represents sellers; and doesn’t work for a company that does. Always look for an exclusive buyer’s agent before deciding to start working with an agent.

If you can’t find a true exclusive buyer agent in your area, work with an experienced buyer agent with a traditional real estate company but one that is small and doesn’t have a lot of listings in the area you wish to buy in. That reduces the chance of an in-house transaction and the inherent conflicts and risk of dual or designated agency.

Mistake #5: Not Having a Negotiating Strategy in Mind Before Making an Offer

Price isn’t everything. Buyers need to look at the larger picture and also prepare for writing an offer:

What price should you offer? What other terms should you consider? What closing date? What contingencies? Should you ask the seller to make certain repairs, ask for a repair credit, or offer a lower price and handle repairs yourself?

What did the seller pay for the home ? How long have they owned the home ? What improvements has the seller done since they have owned the property and what is the value of these? What are other real estate similar to this one selling for in the area? What is this home really worth?

Also take into consideration your strengths and your offer and the homeowner’s motivation to sell.

Mistake #6: Failure to Include Contingencies for Property Inspections

It is both impractical and potentially a waste of money to hire a professional engineer or mechanical inspectors to inspect a property prior to getting the home under contract. You may not be able to come to terms with the seller and thus will be out the money spent for the inspections.

Your purchase offer should have a contingency for, at the very least, an engineer/property inspection. Such an inspection is general in nature and depending on the home you are buying, you also may want to consider additional inspections and tests such as: Radon Inspection ; Lead Paint Testing ; Mold Testing ; Furnace Cleaning and Inspection; Chimney Cleaning and Inspection; Pest Inspections; Swimming Pool Inspection; Well Inspection ; and Septic Testing .

Filed under: Finance

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