Buying a new home is very exciting, especially when you are buying for the first time. In the midst of all of the excitement, it’s easy to get a bit carried away by the beautiful front porch, marble counter tops, old wooden floors, and a little pool in the backyard. When looking at a house and thinking “Wow, this is perfect!”, it may happen that you are beginning to consider a larger purchase than you had originally planned.
I mean, who wouldn’t want a bit more space or a pool to freshen up in summer while organizing little BBQ’s on that beautiful veranda. And on top of that, since it’s already perfect, we wouldn’t need to invest in more renovating. So that is actually saving money, right? Unfortunately, not quite. But do not worry, here we tell you the eight most common mistakes first home-buyers make and how to avoid them.
You do not buy a house from one day to another. Do not be impatient and buy nothing you do not really like. The idea of buying is also maturing. So make sure to start early to inform yourself about the real estate market. Go to as many house inspections as you can, to get a good picture of the houses offered on the market. It is important to have a look in person, because advertisements and pictures can often be far away from the truth. Over time, you will get a feel for the quality of the houses and the prices. If you are impatient and uninformed, there is a risk that you will pay too much for your house, or that you will end up in a total disastrous home.
Planned too Big
Many argue with “I want a house, I need space for my family.” But how much space do you actually need? Do not buy too big. A house that is too big does not only have advantages. In addition to a higher purchase price, it is mainly associated with higher additional costs. Both the land tax and the heating costs depend on the size of the house. Apart from this, the maintenance effort is much higher.
And what happens when the children are out of the house? Many rooms remain unused. So always try to keep in that in mind when thinking about the size of the property.
“Trust is good, control is better.” Particularly when buying a house, you should take that into consideration. Do not believe everything the seller or agent is telling you. Especially regarding the condition of the house. Sellers often try to conceal known defects as they know that overlooking them is one of the most common mistakes for a home-buyer.
So you must always be critical. Visit the house several times. If possible, take a home inspector with you, because his eyes will see what you might be too blind to see. As Kyle Hiscock says in his article: ¨Whether you have purchased five homes or you’re going to buying your first home, a home inspection in almost every case, is highly recommended.¨
Fear of Negotiation
There are people who have a huge fear of price negotiations. They would rather sink into the ground than to ask for a price reduction. The result is that you are paying more than you should. Make it clear that this is your hard-earned money. Every cent that you save at the purchase price will benefit you many times. The lower the purchase price, the lower the basic purchase tax, the credit, parts of the emergency expenses, etc. Like Andrea Murad says in her article 11 Things You Need to Know About Real Estate Negotiations, ‘Negotiating for a home is important since this is the largest asset most people own and there’s potentially a lot of cash at stake.’ So, you can do it, overcome your fear and start negotiating!
Underestimation of the Total Costs
A house is not a bicycle. This kind of purchase is usually associated with a very high cost factor. But the property’s price alone is not everything. In addition to that sum, real estate tax, notary fees and usually also brokerage fees are incurred, which quickly add up to 15% of the purchase sum. You can’t hide these costs, take this into account when financing. We recommend reading Amy Fontinelle’s article in Investopedia if you need more in-depth information.
Being too Naive
Some first-time home buyers can be very naive. One of the most common mistakes is that people might be too optimistic and think, if a property has a few problems, they can fix those quickly. This is not realistic when it comes to the cost to renovate the house. Another thing that happens, some naive buyers will move to a neighborhood on the wrong side of town. Have in mind that maybe you can renovate the apartment but you cannot change the neighborhood nor location you moved to.
Underestimation of Renovation
In the case of used properties, it sometimes happens that there is a renovation jam. Often, these kind of mistakes only become obvious to you when you are moving into the house, because e.g. The windows are leaking or the heating is no longer warm.
You must already recognize the necessary modernization requirements during the inspections before even considering the purchase. A great help to calculate the renovation costs is the App Kukun which estimates home renovation project costs using a real time remodeling calculator. Because if you do not calculate how much the upgrade is going to be, then a bargain house will quickly become an expensive pleasure.
Fundings Falling Through
It does not happen often, but it happens. There are circumstances that make it difficult to get a loan. This is not only the case with low-income buyers, but it also affects those self-employed, even if they earn good money. The reversing process of a contract costs money as well. This is paid by the person who caused the reverse processing. In the case of a canceled financing, you must therefore expect additional costs or even compensation if the notary contract has already been signed. This means that you should never sign the contract, if you do not have a written commitment from the bank, guaranteeing your loan.
Overall make sure you carefully look out for these mistakes to avoid any uncomfortable surprises. Also, don’t forget to study the 10 words you must know when home hunting, and take with you our Checklist for visiting properties.