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Common Mistakes First Time Home Buyers Make

Common Mistakes First Time Home Buyers Make

First time homebuyers tend to make some mistakes that can be very costly. For instance, when looking at a property most homebuyers go on the weekend. Let’s say you’re looking in a rural area because you like the peace and quiet. You exit off the interstate and go down a two-lane road, there are eight signs for big developers selling houses and new subdivisions. The road traffic you experience on a Saturday and Sunday will not be the road traffic you experience Monday through Friday. They may in fact need to widen the two-lane road to a six-lane road, making your commute time almost unbearable while road construction is going on.

One other mistake first time homebuyers make is looking at the houses or subdivisions during the day, when you should in fact go back at night to see what the neighborhood feels like. There could be cars parked on both sides of the street, or any other kind of craziness going on.

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If the property is for sale by owner you need to understand the parameters of the purchase; things like who is going to pay the closing cost, the roof inspection, the septic tank inspection if there is one... who pays and how much? If you’re dealing with an individual this needs to be spelled out and looked at carefully. If you’re using a real estate agent there are still mistakes that can be made. If they are a dual agent, everything you say to the agent will be told to the seller. If you’re using the seller’s agent you need to be cautious about what you say because the seller‘s agent is working for the seller, not you. For example, the buyer says, “I could actually afford to pay $20,000 more,” all of that information will be fed to the seller. A buyer’s agent will be working to the benefit of the buyer and no one else.

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Another component that a first-time home buyer needs to understand is that of staging. Many of the television episodes that feature house flipping always include upon completion, staging the house. Simply stated that means bringing in furniture, dishes, cups, saucers, placemats, flower arrangements, pictures on the wall, throw rugs, towels in the bathrooms, etc., to make it look move-in ready. The fallacy with the staging is none of that is included in the purchase price when you buy the house. The developer or house flipper has simply rented all of that stuff and it goes back to a staging company and their warehouse, or if the developer or house flipper owns it, it goes back to their warehouse. None of the staging items will be included in the purchase of the house unless otherwise negotiated.

Another mistake that is common is when a home sells quicker than expected and the seller doesn’t have another house to move into, now they’re in panic mode and willing to overpay for a property. Don’t ever buy based on emotion! If you’re selling a property to move into something else, you need to have a good idea where you want to go and start the shopping process before you start the selling process.

Another component that can be an issue when buying a property is the school districts. Some states give schools a grade, so you want to get in a good school district if your children are going to go to public school. If not, then where is the closest good private school?

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The Fed has raised interest rates recently and that trend will continue so first-time homebuyers should get a quote from several mortgage companies and then lock the mortgage rate in. Every time interest rates go up an eighth of a percent, tens of thousands of home buyers will now not qualify to get a mortgage. They’ve been eliminated based on the ratios of their debt to their mortgage payment. The Fed in recent days has also reduced the amount of treasury bonds that they are buying. This will have an adverse effect on money supply. What we see today, with the real estate prices, will probably not last indefinitely. We could see a softening of the market as more and more people don’t qualify, and it will have a chilling effect on the selling price of real estate. All that to say this, if you buy a house in today’s market it needs to be a long-term view. Knowledge is power the more you learn the more you’ll be able to accomplish and the more success you will have. You think about that!

Areas of Review

Takeaway

Big picture takeaway points

  1. Look at your spending and see what you can do without.
  2. Saving a few dollars here and there can add up.
  3. Remember what you're working towards.

Reflection

Self-reflection questions to think more about the content

  1. What are my goals and why am I on this path?
  2. Have I looked at my plan every day and guaranteed I’m on the right path?
  3. What are some minor changes I can make right now?

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