Buying or selling a home can be the best of times or the worst of times. Making a rash decision can affect you financially for many years to come. For example, in a typical transaction, the money saved or lost by making the right or wrong decisions can be substantial - anywhere from 10% to 20% of a home's value. Eliminating the following errors will lead to the smoothest, most profitable buying or selling experience for all parties involved.
We have developed a list of the top mistakes to avoid from both a buyers perspective and from a seller perspective.
This is part of a continuing series of articles and helpful tips and insights into helping you sell and market your home by Nick Santoro and Joe Santoro of Personal Property Managers. Personal Property Managers specializes in real estate sales and marketing, home downsizing, content clean out and removal and estate sales, and services Pennsylvania and New Jersey.
1. Do not Rush into a deal
One of the more costly mistakes home buyers make is agreeing to a purchase price that is just too high. Another mistake is overestimating your knowledge of the local real estate market. “It's not until you've been in the market in a particular area for a while that you know what homes are really worth,” says Joe Santoro. If you make an offer on the first house you fall in love with, you risk spending too much based on emotion, not practical sense. So take your time, go see lots of homes, and get a good idea of the local price scale. A tip: If you do enter into negotiations on a house and they come to a standstill, don't be afraid to walk away.
2. Don't overbuy and bite off more than you can chew
Another mistake buyers make that puts them in a more risky financial situation is underestimating the costs of home ownership. It's not enough to calculate the monthly mortgage. You also need to factor in your closing costs and all of the additional fees you'll owe. Many of the fees are negotiable, such as the home inspector's fee, the cost to do a title search, and your attorney's fee. And find out what the current homeowner pays for utilities, taxes, and other monthly costs, so you can be sure you can really afford that home. Also get estimates for repairs you want to make to the home before you move in. You only have one time to buy right, and that's right from the beginning.
3. Don't forget to manage and improve your credit score
To get the most favorable rate on a loan, you have to have a strong credit profile, and that means a credit score of at least 740, according to most industry insiders. Recently, if your score was 740 and you applied for a $300,000, 30-year fixed mortgage, you could qualify for a 3.75 percent interest rate, with monthly payments of $1,389. If your score was below 680, this same mortgage could be in the 4.25 percent range, with a monthly payment of $1,476 for the same loan. This 1/2 a point difference over the life of the loan, would mean that you'd pay $31,130 more. Don't wait until the last minute to scrutinize your credit reports and make any necessary changes to improve your profile. If you find errors, be sure to dispute them.
4. Don't forget to shop around for a mortgage
When shopping for that mortgage, sticking with your regular bank could be costly. It's to your advantage to approach several lenders, including banks and credit unions. It's also important to get pre-approved for a loan before you shop; sellers take preapproved buyers more seriously.
5. Never skip a home inspection
“One of the biggest causes of buyer's remorse I see is people who do not do a home inspection and find out later there were big problems with the house,” says Nick Santoro. You want to be present during the inspection to learn about any costly repairs that might be needed and to get basic info on the home, such as where the electrical panel is and where you shut off the water. A home inspector can also point out repairs that will need to be done in the next few years.
1. Don't over price your home
This is the most costly mistake. If you price your home too high, it will just sit on the market, agents will stop showing it, and buyers will assume there's something wrong with it. You may have to drop the price far below what you think it's worth just to entice people to look at it again. A good agent will show sellers the sale price for at least five similar homes nearby that sold in the past two months.
2. Don't over pay on your real estate commission
Despite the widely held belief that 6 percent is the standard broker's commission, the vast majority of agents are flexible below this number.
3. Do not put your home on the market until its ready
Don't put the “for sale” sign on your lawn until it's show time says Nick Santoro. With 92 percent of home buyers using the Internet as part of their search, according to the National Association of Realtors, photos are key.
4. Refinance if you plan on staying in your home
Mortgage rates are no longer at rock bottom - 2014 saw rates of 3.24% - but they're still low enough that you should consider refinancing. If your interest rate is currently 5 percent or so, even a 4 percent mortgage would lessen your payments.