There are a lot of mistakes home buyers make when purchasing either their first or tenth home. Here are a few of the common ones and how to avoid them.
1)Skipping The Home Inspection
Purchasing a house costs hundred of thousands of dollars. For most people it is the biggest investment they will ever make in their lives. You need to protect your investment in all ways possible. The approximate $500 it costs to have a certified professional come and thoroughly inspect your future home is pennies in comparison to the amount of money you are actually spending. You don’t want to be kicking yourself when 6 months into purchasing your new home you have to fork out $5,000 to have your roof re-done when you could have just spent the $500 to have a inspector tell you it needed to be re-done before you purchased it.
2)Budgeting for closing costs
Most people when trying to budget to make sure they have the necessary amount of money to purchase a home they ask this one important question. “How much do I need to put down”. Now depending on who you ask this question to you may get different answers. In most cases mortgage regulations require that you put at least 5% down (although some zero down options are still available). That is a downpayment to cover the loan on the price of your property. This percentage however does not take into many other fee’s you will incur through out to home buying process such as:
- Home Inspection
- Legal Fees
- Well/Septic Inspections
- Water Quality Tests
- Deed Transfer Tax
To be on the safe side you should make sure you have at least 8% to cover all expenses you make incur. This should also allow you a little bit extra in the bank so that you will not be completely house broke when you move in.
3) Always looking for a better deal
In the Halifax the market is such that new properties are popping up on the market everyday and with the exception of a few, most of them will be on the market for at least a month. Therefore there is nothing pushing buyers to “Pull the Trigger” on a property and make a offer. This can turn into a slippery slope. The hesitation to move forward on a certain property because you fear another property will come on the market shortly after and at a better price will never end well. You will never be satisfied with the home you purchase and in most cases you will never be able to make a decision and move forward. It can be difficult on you physically and mentally and can often be a heavy burden on your relationship (if you are purchasing with a spouse/partner).
Be educated, learn to recognize a good deal and when you find one, make a move!
4) Place heavy value on “Assessment Values”
There are 3 main types of Values that are placed on properties. Not many people know what these 3 values are, how they differ and how they are calculated. In some markets these values can be very similar and in some markets these value can be drastically different.
Market Value- this is a value determined by comparing active, sold and expired listings similar to the subject property to determine what a fair price would be for that subject property to sell for.
Assessment Value – is a value used for tax purposes. I won’t get into how tax assessments are calculated as that would require a blog post of its self. Tax assessment values are often not relative to the actual market value of a property. Often times certain features of homes (heat pumps, garage’s, etc) are not even taken in to account when its tax assessment is being calculated. Also, often the current tax assessment may even be what the property was “worth” 2-3 years ago. In most markets these value’s should not be considered when determining how much a home is worth, only to determine how much tax you will be paying on the property.
Appraisal Value – these values are determined by certified Appraisal Companies. These are normally a lot closer to market value’s however they normally are on the higher side. These value’s take things like square footage, lot size, oil tank/furnace age, heating type etc. However they do not take into account things that can make or break properties. Flooring type, condition of appliances, layout/look & feel, counter tops, cabinets, etc. These things can add or decrease property value quiet a bit.
Make sure you look at all three of these values, but don’t place too much weight on one or the other. At the end of the day you want to determine what you would be able to resell the property for tomorrow if you bought it today and the only way to do that is two compare it to what has sold and what is for sale (market value).
5) Letting Emotions get involved
When negotiating with sellers with regards to the conditions of sale. Most home buyers want to “WIN” the negotiation. They want to get the property for the highest amount off of asking price as possible so they can feel like they beat the sellers. Rule #1 of negotiating – “It’s not about beating your opponent”. The goal when negotiating a deal on a property should be to find a common ground that works for both you and the sellers. The goal should not be to get the property for the most below asking price as possible, it should be to get the property for as far below “Market Value” as possible. There is a distinct difference between those two. If you have done your home and determined that a specific home is worth $300,000. When you are in the process of negotiating and the sellers reach there bottom line at $290,000 you should feel comfortable paying that amount for it regardless of whether the asking price was $295,000 or $325,000. The sellers can ask whatever they want for their property. At the end of the day make sure you are a educated buyer regardless of whether the seller is educated or not.
Make sure you have a Realtor of your own that you know, like and trust representing you when buying a home. They have been part of multiple real estate transactions, they will be able to help you budget to cover your closing costs, they will find you a good, reliable home inspector, they will provide you with the information to determine market value on properties and most importantly, they will negotiate on your behalf and help you keep the emotion out of it.
Make sure to call/email/ or text me with any questions you may have before getting started finding your new home.