Buying a home can be very stressful or a lot of fun, depending on how you approach it. When you are “in the know”, you can eliminate the majority of the stressors. Here are 8 pitfalls to avoid so that you can be knowledgeable and successful in your endeavor to buy a home and help you make one of the largest financial decisions of your life.
01. Having Your Loan Denied – We recommend that you have your mortgage broker get you completely pre-approved. Obtaining a loan can be very frustrating because lenders require a mountain of documents in order to assure themselves that you are a qualified buyer. If you have a pre-qualification, you can still be denied a loan. Instead, you want to go through underwriting and have a pre-approval, which means all you need to do is find the perfect home, order an appraisal, get an inspection, and close.
02. Rookie Mistakes – Make sure your real estate broker knows how to get you under contract, especially in this challenging market, and has a proven track record of working with buyers in highly competitive markets. For example, ask the broker how many closings they had in the last 12 months. If they tell you one, two or three, you may be working with an inexperienced agent. Further, you want to make sure your real estate broker and mortgage broker can work together effectively. You will need a specific pre-approval letter for each offer you submit, and your real estate broker may need the pre-approval letter very quickly. Moreover, make sure you real estate broker knows how to handle escalation clauses, is effective in handling inspection issues, and can deal with rent-back situations. We are seeing all of these in the marketplace in this highly competitive market.
03. Being Disorganized – We recommend to our clients that we craft a game plan that is highly targeted. The clearer you are about the type of home you want, the easier it is to find that home. If you are not using a concisely articulated game plan, you will find yourself very frustrated trying to buy a home, where you may submit lots of offers only to be outbid over and over again. We use a GROW analysis, GROW is a pneumonic, to help get our clients organized.
04. Being Unable to Find Inspectors – It is mission critical to have a good general property inspector. Your real estate broker should be able to refer you to at least 3 general property inspectors. Sellers will want you to conduct your inspections in about a week or less. Sellers know that, if a buyer is going to terminate a contract, they are likely to do so at inspection. If you know the inspectors you want to hire going in, this will save you time and a mad rush to contact inspectors. Some inspectors are very busy, so you may need to vet more than one. You may also need more than one type of inspector. You could end up needing a structural inspector, a well/water inspector, a roof inspector, a sewer inspector, a fireplace inspector, along with others. You could even end up needing to test for mold or meth, and you need to know the signs or when to do that. Your real estate broker should be able to plug you into all those resources and quickly.
05. Surprises – There are a lot of documents to review in every real estate transaction. It is easy for a buyer to feel like they are swimming in paper, so it is very important that you know what documents to request, and what to do if a seller has no documentation to provide you. It is always troubling when a seller does not provide a buyer with a Seller’s Property Disclosure. It is equally important to know what to expect. Your real estate broker should be able to walk you through all this and alleviate or validate your concerns.
06. Having a Lender Refuse to Lend on Your Contract Price – In this market, appraisals are taking longer to receive. We recommend that our clients mortgage brokers order the appraisal as soon as you go under contract. It is also very important that your real estate broker provide you with a comparative market analysis, and that you know where the value will likely come in. Appraisals can be subjective, and we see values come in high and low. It is important to know when you may need to contest the value on an appraisal. Further, if you find yourself competing for a home where you need to offer over the list price, you need to be sure that you have the cash to back that up, or a comparable sale to provide to the appraiser to justify the higher value. Your real estate broker should be able to help you understand valuation and appraisal guidelines so you do not get surprised.
07. Title Problems – A very important part of a real estate transaction is understanding what title insurance is and how to understand the title commitment you will be receiving. We provide our clients with several documents to help them understand what title insurance is, why you need it, and how not to void it. As the Colorado Real Estate Commission puts it, “many types of matters can adversely affect your property’s title, and it is very important as a buyer for you to identify and understand all title issues affecting your prospective property before you buy.”
08. Closing Confusion – Nothing bothers us more than for a buyer to go to their closing unprepared, having never seen their closing documents, and not understanding what they are signing. So, when it’s time to close, you should ask to see your closing documents at least 24 hours in advance and to have your questions answered ahead of time. Closings can take as little as 30 minutes and as long as a few hours. The more you know, the easier the process will go.