Top 3 Mistakes to Avoid When Buying a New Home
Mistake #1: Buying Beyond Your Means
One of the most exciting parts about shopping for a new home is that you can indulge your fantasies. It's fun to dream about living in a home with all the latest and greatest features and innovations, and when presented with the touch of a skilled real estate agent, you may well believe that you could and should buy the house of your dreams, at any price. However, Art Mendoza, principal and real estate manager at L.A.-based consulting firm Copia Solutions, says that "busting your budget is a cardinal sin when it comes to a home purchase." While the glow of owning your fantasy home can lift your spirit for months, "sooner or later the financial reality will hit you – hard," says Mendoza. If you reach beyond your means for a home, you are committing to 30 years of payments you may never be able to afford. Throw in additional and often overlooked costs, including utilities, maintenance costs and property taxes, and you may be running to catch up for years – if you catch up at all.
Mistake #2: Skipping the House Inspection
Once you've found the home you want at a price you can afford, it's tempting to rush into signing all the paperwork and starting your new life as quickly as possible. "Not so fast," says Mendoza. "All homes – particularly old ones – have their own little quirks that should be reviewed by a professional." If you do not get a formal inspection before you buy your new home, you may be taking on significant and costly repairs. Common problems like water damage and faulty insulation aren't readily apparent to most home buyers, and a professional inspection may be required to note all the damage. According to Mendoza, "you won't just be responsible for additional repair costs, you'll also miss out on the opportunity to negotiate a lower price with the sellers" by unearthing problems.
Mistake #3: Accepting a Handshake Agreement
Buying a home is usually a cordial if not downright friendly process. Unlike buying a car, which is often confrontational, home buyers and sellers typically want to come to an agreement that facilitates a smooth transfer of the property. However, just because a seller invites you over for tea and cookies doesn't mean that you're getting a good deal on the property, or that you can trust everything she tells you.
"Although sellers rarely try to deceive buyers, they're still trying to make a sale," Mendoza explains. "If they promise to undertake any home repairs before the sale, get it in writing. Make sure you understand what, if anything, comes with the property, and what the seller is going to take with him." For example, you might anticipate that the bedroom drapes will stay with the house, or that certain appliances or fixtures will remain. If you accept a handshake agreement and don't get it in writing, you have no recourse if the buyer either changes his mind or simply doesn't want to fulfill his end of the bargain.
Life After Purchase
The very nature of buying a home implies a long-term commitment. Once you move into your home, plan on staying a while to get the most value out of your purchase. If you have to move within a few years of your purchase, you might end up taking a loss, particularly if you made only a small down payment.
You should also beware the trap of immediately trying to furnish every inch of your home with upgraded amenities. While it's certainly tempting to deck out your new home with a matching level of furniture, you might end up piling on credit card debt at a time when your finances are already likely strained. Live with your home for a while, see what you really need – and what you can afford – and proceed accordingly.