Updated Sept., 2010
Buying a home can be stressful. There are many potential pitfalls lying in wait, whether you’re a first-time buyer, a seasoned veteran or somewhere in between. The unpredictable economy and weak job market weigh on buyers and can feel like unwieldy monkeys on the backs of possible buyers. But there are things you can do — and learn — before making a move that can allow you to steer away from these pitfalls and into the driveway of your dreams.
Know the Market
To understand the current real estate market and the turmoil it has been through in the last few years is to better position yourself as a knowledgeable buyer who understands the current and potential future value of any given home. As a September 2010 TIME Magazine article indicated, the market is tumultuous and purchasing a home is not always the right decision for every potential buyer. It is important to evaluate your long term family, savings and investment goals before purchasing a home.
Know the code
Understanding the terminology used by sellers, real estate agents, websites and mortgage lenders is the first step towards getting ready for house hunting. Learn how to read a home listing: Strip away all those fluffy adjectives and watch for important omissions. For instance, if a listing flyer advertises three bedrooms but does not mention the number of bathrooms, it probably has only one. If it had two, it would probably say so.
A common mistake is putting blind trust in industry specialists, such as real estate agents, mortgage lenders and others. Especially in this market, don’t ignore your gut instinct! As the buyer, you can afford to be picky and interview multiple professionals as well as stop using someone if you don’t feel that they have your best interests in mind. Remember that these professionals are human beings and most have a financial stake in your decision. So take your time; interview your potential partners until you are satisfied that you have found people who you feel will represent your best interests throughout the whole process of buying a home.
Using a real estate agent can help you avoid potential pitfalls. “It is important for the buyer to have his or her own agent,” says Ellen Jensen, a broker. But watch for an agent that’s working both sides. “Agents can legally represent both the buyer and seller,” Jensen says. “We call this wearing two hats, and it is very difficult to do. Many agents won’t, in fact, do it. It could be a lawsuit waiting to happen. The buyer is better served by using his own agent to represent him.”
Jensen also encourages buyers to be leery of a seller’s agent willing to offer a better price if they agree to use the seller’s agent. “This tactic can be somewhat unethical and [the buyer] should be careful of what and whom he is dealing with.”
There are many potential pitfalls with regard to financing, but the biggest, according to certified loan specialist Lori Hastings, is failing to get a pre-approved mortgage first. “Equipping yourself with a pre-approval allows you to show prospective sellers that you are serious and that you have done your homework,” Hastings says.
According to Jensen, it’s important to remember when shopping for a home that many on the market are staged — professionally decorated to make them more appealing to buyers. “Buyers should try to remove the furnishings in their minds, try to see the bare walls. If it’s right, don’t worry about the sofa that doesn’t fit. That can easily be replaced,” Jensen says.
Jensen stresses the fact that this should be a business decision and not an emotional one. “This could be one of the most important business decisions they will ever make. What will it take to make it what they really want? How much time and money? How long do they anticipate they will live there?”
Another important thing for buyers to do is to check comparable area sales before shopping. This can be done on Web sites such as realtor.com and zillow.com. According to Jensen, location is the most important factor determining the price, followed by the square footage. “Realtors use comparable sales when they advise sellers, and appraisers use comparable sales in their appraisals also,” says Jensen. She recommends that when using comparables, buyers should make sure they are recent, preferably no more than six months old.
Web resources can be a very effective and efficient tool for educating yourself on the home-buying process and current market conditions. “The home-buying process can be very overwhelming, there is no doubt about it,” says Sarah Mann, spokesperson for Seattle-based Zillow. But there is information that can help inform buyers and Zillow publishes a blog with all sorts of relevant articles to both buyers and sellers.
Whether buyers have a great deal of experience or are buying their first home, education is the key to leveling the playing field with sellers and ensuring your home purchase is a positive experience and an excellent business decision.
realtor.com— contains all Master Listing Service (MLS) listings
zillow.com — shows comparable sales, “Zestimates” (Zillow’s estimated market value of a home), and offers a real estate guide (learn the ins and outs of buying a home on Zillow’s Real Estate Wiki)
The 106 Mistakes Homebuyers Make and How to Avoid Them, by Gary Eldred, Wiley
After the Fall: Opportunities and Strategies for Real Estate Investing in the Coming Decade by Steve Bergsman
Missed Fortune 101: A Starter Kit to Becoming a Millionaire, by Douglas Andrews, Warner Business Books
"Why Your First Home Shouldn’t Be Your Dream Home" – San Francisco Chronicle (September 2010)
Home-buying courses taught through unbiased sources, such as your local community college.
Karen Dawson, owner and principal of Dawson Communications Group, lives in Maple Valley with her husband and two children.