“Measure twice, cut once,” so the old adage goes.
Buying a home is an expensive proposition, no matter how you slice it. It entails many significant costs, and for many, this is the single largest purchase they’ve made in their entire lives.
No matter whether they are spending $200,000 or $2 million on a home, every buyer has fears and anxiety when it comes to real estate.
As such, the stress of the buying process can often cloud a buyer’s judgement. So without further ado, here are six common costly mistakes that I see buyers make:
1. Being seduced by a home’s good looks and ignoring the fundamentals
Everyone loves a beautiful home.
There is nothing more attractive than an updated or newer home that has a beautiful kitchen, updated baths, trendy floors and an architectural aesthetic that is pleasing to the eye.
However, an untrained eye might overlook critical items that could be costly down the road, such as the reputation of the homebuilder, inferior construction, inferior brands of mechanical systems, like the make and model of the HVAC system or water heater, and so on.
What about the age of the roof, plumbing and electrical system?
2. Not buying for location
This is a common one. The buyer falls in love with new construction miles away from their jobs or the conveniences of every day life — shops, services, restaurants and so on.
They are so focused on the “new” aspect of the home versus the practical things that can affect the quality of life, and they discover they bought a home, not a lifestyle or a neighborhood, which can be equally important.
Subsequently, the commute becomes unbearable, and they grow tired of the long drive just to get a loaf of bread from the nearest store. They realize they long for more than just a house to come home to and desire a neighborhood, town and community.
After a year or two, they want to sell the home. So much for all of the closing costs and moving expenses that were just paid, as they will have to do that all over again. Profit margins may be nil because they could still be competing with new construction where they purchased.
3. Skimping on services
It is not unusual for buyers to go into major money saving mode when they are plunking down money for a down payment.
Unfortunately, this means that they may shop for important services like home inspectors or insurance coverage by price alone. All service providers are not created equal, and expensive mistakes can happen when a buyer selects them this way.
A home inspector might be novice and eager to discount fees to grow their business. As such, they might miss a property’s important components and fail to evaluate them properly.
If a buyer is going to remodel after closing, they often choose the least expensive contractor or select the most inferior finishes only to have to redo things later that were shoddily done or did not last in the first place.
4. Waiting on upgrades until after close
Buyers building a home, especially first-time homebuyers, often err on the side of thinking that they can get a better deal on certain upgrades after closing versus doing them with the builder.
That might be fine for certain decorative things like a tile backsplash or fencing, but when it comes to flooring or fixtures, going through the builder might ultimately be a more practical option.
After all, the home has to be finished to obtain a certificate of occupancy for closing, which means the home must be complete.
Do you really want to rip up the floors just as you’re moving in? What are you really saving? Time, money or hassle?
5. Choosing a lender based on advertised interest rate alone
All lenders are not created equal. Repeat: All lenders are not created equal, yet buyers often defer to whatever lender has quoted them the lowest rate.
News flash: That quoted rate might be a trick to reel them in. When they go under contract on a home and make the application, buyers realize that the rate really isn’t the best deal because the good faith estimate shows a hefty origination or processing fee.
Congratulations! The buyer got a lower rate because they essentially are paying to buy it down. The buyer often has no idea that they are in for some surprises with regard to the interest rate and fees because there is no such thing as a free lunch. And what about the lender’s ability to close on time?
Once application has been made and the appraisal ordered, the buyer might feel ambivalent about their choice of lender, but it can often be too late at that point to switch gears without a huge contagion effect and raising concern amongst all involved in the transaction.
6. DIY moving
With all a buyer has to go through to purchase a home, it is stressful enough to get to the closing table between loan application and approval, the inspections, repairs and the appraisal.
The buyer may begin to feel tapped out with all they have had to expend financially to get to this point, so the one area they think they can skimp on is the movers.
After all, all they need to do, they think, is to rent a moving truck and round up a few friends and family members to help. Who has a few more thousand dollars to spend on movers?
Well, hold on! Buyers typically underestimate four things: how much stuff they have, the size of the truck they are renting, the amount of time needed to move and the availability and reliability of those they have enlisted to help.
Trying to save money on moving is a noble idea, but when you factor in the time, effort and energy trying to move an entire household on time and without damage, urge your buyers to consider these risks.
Let buyers know: There is no insurance if you or your best friend accidentally damages your television in transit. No one can cut you a check to address the huge gauge on that expensive coffee table from the trendy designer furniture store.
Buyers often spend more money having to rent a larger truck, or they end up keeping it longer than anticipated because their “best” friends and family bailed or had sudden emergencies.
Buyers often want to charge full throttle into the homebuying process with a “penny pinching” mindset, but agents can save these kinds of clients money and heartache by taking the time to explain how shortsighted and expensive these kind of corner-cutting tactics can be.