7 Deadly Mistakes Unrepresented Buyers Make and How to Avoid Them

8 03 2007

 It’s alarming the risk consumers, me included, will take to save a buck. The most common trend is to quickly become an expert in the field by glazing over page after page online and slowly building enough confidence to pull the trigger in a buying or selling decision. 

It’s important to educate yourself no matter who is representing your interest, but even though you can go it alone, is it worth the risk?

 Some buyers and sellers think the best way to save money is by not working with a Realtor in a real estate transaction.  I submit, you could also save a chunk of change by choosing to represent yourself in a court of law… but would you do it? Are there savings? Is it worth it? Why should you work with a professional?

Jason Groves represents buyers for FREE. What a deal! However, if you are thinking about “lone-wolfing” it, here are 7 pitfalls you must know before moving forward (this is free too).

1.  Buying the Wrong Home.

Finding the right home can be a long and emotional process. If you don’t begin by distinguishing your needs from your wants, you may find that you settled for the wrong place. Solution: Categorize your needs vs. wants and write them down. When I work with buyers this is the first step we take. This gives us parameters to begin our search and to sort through the thousands of homes on the market scattered through out the city. Don’t forget to consider how your needs may change in a few years. Will you have more or fewer family members living in the home say in three to five years? By taking 20 minutes to do this my buyers find a home faster and save money by setting boundaries to work within.

2.  Not Getting Pre-Approved First

Many buyers will find the perfect home and put in the offer, only to find the seller has accepted another offer simply because the other buyer was pre-approved for their financing. Solution: Contact a mortgage broker, I know of some really good ones, and fill out a loan application. Based on the information you give, a reputable lender will pull your credit report and run your information through Fannie Mae Desktop Originator/Underwriter. This doesn’t tell you how much you’re qualified for; it tells you how much you’re APPROVED for (Huge difference. I will explain in a future post). My background in real estate finance serves a resource for buyers who are confused about the loan process. I will make sure the lender you chose to work with will deliver on their promises made to you.

3.  Not Asking Enough Questions

Seems like a simple thing to do, but buying a house is a very emotional and time consuming process. Chances are you are employed full-time, perhaps have a family and are so distracted by other things that a few of these vital questions slip through the cracks. Solution: Seek out professional advice. When my buyer is very interested in a home, we take a step back and really flush out the facts about a home, not just what the seller says. A great place to start is with the price tag. Too often, buyers mistakenly rely on the price of other homes for sale in the neighborhood as an indicator for fair market value. Tisk, tisk… this is one of the quickest ways for a person to walk into a nightmare of a real estate investment. A professional will look at what homes SOLD for in the neighborhood. I don’t care what the neighbor’s asking price is, that doesn’t mean he’s gonna’ get it. What have homes sold for?  I will take it a step deeper with my clients. Not only will we know what fair market value is in the neighborhood, but we’ll also look at what direction the price trend is going. Are prices trending upward or downward? Which category would you invest your money in? This is just the beginning of our market research prior to submitting an offer. Other questions you need to ask are: What has been disclosed about the condition of the property? Do any red flags exist in the Seller’s Disclosure Notice? What about zoning and future development in the area? What issues might affect value? What are the restrictive covenants for this home? Will we be able to use the home as we intend to? What about resale and marketability? Will this home be easy or difficult to sell? This should get you started. Lastly, this is one of my favorite tips. If you want to learn more about a particular home, try talking to the neighbors. They love to tell secrets and will want to know who might be living next to them.

4.  Not Getting a Home Inspection

Again, it’s scary what people will do to try and save money. Solution: Pay $300-450 and get a licensed inspector to perform a thorough inspection of the property before the termination option period expires so you can cancel the contract and not lose your earnest money deposit if you aren’t satisfied with the results of the inspection. Property condition issues are the leading cause of law suits filed around real estate transactions. Don’t risk thousands of dollars in legal fees and heart ache just to save a few hundred dollars. As a part of my service, I can refer you to a few reputable inspectors.

5.  Not Examining the Title History

This is a big one. Don’t even think about skipping this step. Solution: If you go it alone. You WILL need to hire an attorney to perform a title search. You WILL pay for the attorney’s billable hours. The title search will reveal any encumbrances such as tax liens and other title defects. Do not pass GO, do not collect $200 without protecting yourself with regard to the title of the property. Besides, if you intend to finance your home, the lender will require a title insurance policy be purchased and commitment issued before loan approval will be granted.

6.  Not Having a Current Survey

Similar to the title policy, the survey is another out of pocket expense you can plan on. What if the subject property is in violation of any zoning ordinances or your fence crosses your neighbor’s boundary line? Solution: The only way you can know the answer is to have a current survey of the property. What if you plan to put in a pool in the future in that lovely back yard, but turns out there is a utility easement that runs right across yard, right where the pool should go? You can not possibly know this for sure unless you have a current survey. Once you do have the survey performed, you’ll want to review it with the survey company and look for any variations.

7.  Not Performing a Final Walk-Through Prior to Closing

The house looked great when you went under contract, but after closing you excitedly drive to your new home only to find out the seller has taken out all the carpet and damaged the dry wall in the living area. What now? Solution: When working with me, we will always schedule a final walk through, multiple if needed. Also, we will cover what will convey with the property and put it in the contract. It’s the little things that make a difference. Every day I help my clients buy and sell their homes, and I’m never too busy to serve your needs. Call me to find out how I represent buyers like you, for FREE.

 

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4 responses

9 03 2007
Bethany Pirttima

I would also argue another pitfall could potentially be choosing the wrong “free” realtor. What steps would you suggest to home buyers to ensure they are working with someone who will represent their best interest? After all… the more you pay for the house… the more the realtor gets paid.

I can imagine you have more than likely heard this concern voiced before so I am teeing you up to knock this one out of the park! And yes… I did just combine two sports references.

9 03 2007
jgroves

Bethany,

Great comment! Only a real athlete could make a reference like you just did. I’m impressed.

You’re exactly right. Choosing the wrong person to represent you could be a draining experience (Definitely inspiration for a future post. I’ll try to keep it short). Here are a few things to start with:

1. Find a BUYER’S agent if you’re buying. (When you call the number on the sign, the person that answers the phone is the listing agent. They represent the seller’s best interest and are bound to tell the seller any sensitive information that would reveal your strength of position. In other words, don’t show your hand before the turn card is dealt. It’s much harder for you to negotiate a lower price when the seller knows how much you’re looking to spend.)

2. Ask for a good referral from friends and family.

3. Interview multiple agents before you begin. (Get a feel for their competence and personality. Make them earn your trust, don’t just give it to the first person you meet.)

4. Don’t rely too heavily on experience. (An agent could’ve been a lousy agent 30 years ago, chances are they’re still a lousy agent 30 years later… Remember, quality not quantity.)

5. Set your limits. (As you mentioned above, the more you pay for a house, the more a Realtor will be paid in most cases. If you say, “I don’t want to spend more than X amount,” then I would wonder if your agent was truly representing your best interest if they keep showing you homes that exceed your price point. I believe it’s prudent for every buyer not to purchase a home for the max amount they’re approved for… you never know what your income will be like in six months)

6. Open and consistent communication. (Do they answer the phone on the first ring, or does it go straight to voicemail? Sounds simple, but is your agent too busy for you? In the interview ask them how often they will be in touch with you and how they intend to communicate with you. If after the interview, you’re still uncertain try them out for a week. If you’re disappointed with their performance, don’t enter into a written contract with them. In the end you decide who is going to represent your best interest.)

Hope this helps and thanks for the comment! Windy McWinderson is done now.

14 03 2007
Shayla

Your blog entry is very timely! Recently I was reading an article in Print magazine (a graphic design publication) about the emergence of the do-it-yourself design culture. Today there are design templates for just about everything, from business cards to blogs, logos to letterhead. And then there’s that thing we call YouTube! Do-it-yourselfers are not unique to the design world; but rather, as you stated, are popping up across all industries, real estate included.

The article I was reading stated that “designers no longer have a monopoly on design. The tools are cheaper, more powerful, and easy to find.” The same could be said for real estate too. Due to an ever-increasing number of online home research tools, it’s easier than ever to access real estate information. But does DIY technology preclude the need for a professional real estate agent? The Print article went on to say that “to fear that shoddy DIY work will replace good professional design is to suggest that the two are indistinguishable to the untrained eye.” Again, I see a real estate parallel here.

I don’t think the DIY books or MLS tools will ever replace the need for a hard-working, professional realtor. Statistics prove that realtors MORE than earn their keep. Buying a home is the most expensive investment decision most people will ever make. Why leave it up to a “do-it-yourself” kit!

15 03 2007
jgroves

Well said. I’m glad you see the value in being represented by a Realtor, albeit the RIGHT Realtor.

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