Purchasing a home is a very emotional experience. You may make a number of classic house hunting mistakes if you let your emotions get the best of you. Because homeownership has such far-reaching consequences, it’s critical to keep your emotions in check and make the most informed decision possible.
Your goal is to end up with a home you love at a price you can afford, but many people make mistakes that hinder them from realizing their dream. Let’s take a look at some of the most common house hunting mistakes—and how to avoid them especially when you are a first time homebuyer.
1. Not knowing how much you can spend
It’s difficult to return to a location once you’ve fallen in love with it. You begin to fantasize about how perfect your life would be if you had access to all of the beautiful amenities it provides, such as the magnificent tree-lined streets, the jetted bathtub, the huge kitchen with professional-grade appliances, and so on.
However, visualizing yourself in that house is only hurting yourself if you can’t or won’t be able to afford it. To stay away from temptation, limit your property hunting to places in your financial neighborhood. You’ll wind up longing over something you can’t buy if you browse at areas outside your price range. This might put you in the risky situation of trying to spend beyond your means or making you unhappy with what you can realistically afford.
Begin your search at the lower end of your budget. There’s no need to go higher if what you find there satisfies you. Remember that when you pay an extra PhP500,000 to buy a house, you’re not just paying an extra PhP500,000; you’re paying an extra PhP500,000 plus interest, which might end up costing you double or more over the course of the loan. It’s possible that you’d be better off spending that money on something else.
Suggested Read: The Complete Homebuying Guide
2. Ignoring the Mortgage Pre-Approval Process
What the bank says you can afford versus what you know you can afford (or are comfortable with paying) are not always the same, as we should have learned from the subprime mortgage debacle.
In contrast, what you think you can afford and what the bank would lend you may not be the same, especially if you have bad credit or inconsistent income.
Before making an offer on a house—or even going house hunting in earnest—make sure you’re pre-approved for a loan. If you don’t, you’ll be wasting the seller’s, seller’s agent’s, and your agent’s time if you sign a contract only to find out later that the bank won’t lend you the money you need—or that it’s only willing to lend you money on terms you don’t like. The pre-approval procedure can also assist you in determining the financial neighborhood in which you should look for a home.
Even if you’ve been pre-approved for a mortgage, if you do something to lower your credit score, such as financing a car purchase, your loan could fall through at the last minute. You may have to forfeit any deposit or earnest money you put up when you signed the contract if your activities cause the deal to fall through.
3. Doing No House Hunting
While you should be practical in your house hunting and willing to make some compromises, don’t give up on critical issues.
Don’t buy a two-bedroom home if you know you’re going to have children and will need three bedrooms. Similarly, don’t buy a condo just because it’s less expensive than a house if one of the main reasons you’re tired of living in an apartment is that you despise sharing walls with your neighbors. True, you’ll have to make some concessions to be able to purchase your first home, but don’t make one that will put your finances under a lot of strain.
Unless you’re a high-end buyer seeking for a custom home, chances are you’ll find a number of homes that are similar to the one you prefer. Many homes in most communities are similar or the same model, and they may have all been built by the same builder. Even if you can’t find an exact replica, you’ll probably be able to discover a home with many of the same features. If you’re thinking about buying a condo or townhouse, the odds are in your favor as well.
Being open to the possibility of continuing your quest will prevent you from making hasty judgments that you may come to regret later. There are numerous real estate websites and applications that may help you speed the house-hunting process, allowing you to examine hundreds of properties from the comfort of your own home in just a few hours.
4. House Hunting without an Agent
If you’re serious about buying a house, don’t go to an open house without first consulting a real estate agent or broker. Agents are bound by the ethical norm that they must operate in the best interests of both the vendor and the buyer. However, you can see how negotiating with a seller’s agent before contacting your own agency may not put you in the best negotiation position.
5. Lacking Vision
A homebuyer could feel like Goldilocks in the three bears’ house at times: This is too big, this is too small. A big aspect of house hunting is figuring out what can be fixed and what can’t.
Even if you can’t afford to replace the bathroom’s terrible wallpaper right now, it might be worth it to put up with the ugliness for a while in exchange for a more affordable home. Don’t let cosmetic flaws scare you away if the home satisfies your needs in terms of the big elements that are impossible to improve, such as location and size.
Simultaneously, don’t be fooled by modest improvements and cosmetic tweaks. Sellers employ these low-cost methods to play on your emotions and demand a much higher price tag. Sellers may spend up to PhP100,000 on minor modifications or a few thousand dollars on staging. Furthermore, conducting house improvements yourself, even if you have to employ a contractor, is typically less expensive than compensating a seller for the enhanced home value after they have already completed the work. And you can do them according to your own preferences, not those of others.
6. Ignoring Critical Flaws
If you’re on a tight budget, look for homes that haven’t yet reached their full potential. Your increased equity as a result of your improvements will allow you to climb up the property ladder.
That said, if you’re going to buy a fixer-upper, don’t buy one that’s too big for you to handle in terms of time, money, or your own abilities. For example, if you think you can do the work yourself but discover you can’t once you start, any repairs or upgrades you planned will almost certainly cost twice as much once labor is factored in—and that may not be in your budget.
Furthermore, you must include in the price of repairing any damage you may have caused, as well as the costs of replacing any supplies you squandered. Before buying a property that isn’t move-in ready, honestly assess your abilities, your money, and how quickly you need to relocate.
7. Ignoring the Surrounding Area
Don’t only glance at the property during your house hunting; take a peek at the surrounding environment as well. Of course, it’s impossible to foresee the future of your chosen neighborhood with absolute certainty, but inquiring about or investigating its prospects today can help you avoid unpleasant shocks later.
You should ask the following questions:
- What kind of neighborhood development plans are in the works?
- Is it conceivable that the roadway will become a major thoroughfare or a popular rush-hour shortcut?
- Is there talk of a nearby bridge or roadway being built in the next five years?
- What are the local zoning regulations?
- Is there a lot of vacant property nearby? What is likely to be constructed there?
- Has the neighborhood seen a rise or fall in housing values?
If the answers to these questions are satisfactory, the location of your possible home can retain its rosy hue.
Suggested Read: 10 Questions Every Homebuyer Should Ask Their Real Estate Agent
8. Making a Hasty Offer
If you find a home you want during your house hunting in a hot market, you may need to make an offer quickly. You must, however, strike a balance between the urge to make a speedy decision and the need to ensure that the home is perfect for you.
Don’t skip key tasks like making sure the neighborhood is secure at night as well as during the day (visit at different hours) and looking into any noise issues, such as a nearby train.
Ideally, you’ll be able to sleep on the decision for at least one night. The quality of your sleep and how you feel about your home in the morning will reveal a lot about whether the decision you’re about to make is the appropriate one. Taking the time to think about it also allows you to investigate how much the property is truly worth and make an acceptable offer.
9. Dragging Your Feet
It’s a delicate balancing act to make sure you make a well-informed selection without taking too long. It might be upsetting to miss out on a property you were almost ready to put an offer on because someone beat you to it. It may also have financial ramifications.
Assume you’re self-employed. Perhaps time is more valuable to you than it is to others. The more time and energy you have to devote to looking for a house outside of your typical activities, the less time and energy you have to work. Not prolonging the home-buying process needlessly may be the best thing for your company, and your company’s future success will be critical to paying the mortgage.
If you don’t act immediately, someone else will, and you’ll have to continue searching. Don’t underestimate how inconvenient and time-consuming house hunting may be.
10. Excessive Provisioning
It’s all too easy to get drawn into a bidding battle if there’s a lot of competition in your market and you find a place you really like—or to try to avoid a bidding war by offering a high price in the first place if there’s a lot of competition in your market. However, there are a few potential issues with this.
First, if the house doesn’t appraise at or above the amount of your offer, the bank will refuse to lend you money unless the seller lowers the price or you pay the difference in cash. If this happens, you’ll have to pay the difference between your bid and your mortgage out of pocket. Second, if market circumstances are similar to or worse than when you bought the house, you may find yourself upside down on your mortgage and unable to sell.
Examine similar sales and seek your agent’s opinion before making an offer to be sure the purchase price for the home you’re buying is acceptable for both the house and the location.
11. Failure to Inspect during House Hunting
You’ve discovered the ideal location, your offer has been approved, and you’ve signed a contract. It’s tempting to imagine that the moment you enter escrow, you’re a homeowner, but hold on. Before you close on the transaction, you must first determine the condition of the property. You don’t want to end up with a money pit or the hassle of having to deal with a slew of unanticipated (and perhaps costly) repairs.
That’s why a comprehensive investigation of the property is necessary—indeed, your mortgage lender may require it. You can avoid making a serious financial error by keeping your emotions in check until you have a complete view of the house’s physical condition and the soundness of your potential investment.
12. Becoming Desperate
When you’ve been looking for a while and haven’t found anything you like—or, even worse, are being outbid on the ones you do want—tempting it’s to become impatient to locate your new home right away.
However, if you move into a home that you dislike, the transaction costs to leave it will be high. You’ll have to pay a commission to a real estate agent (up to 5% to 6% of the transaction price), as well as closing charges for your new home’s mortgage. You’ll also have to cope with the stress and expense of moving once more.
It’s fine to wait till something that suits you comes along if you have the time. You’ll discover something you can live with if your demands are reasonable in relation to your budget. Every day, new homes are listed for sale.
House Hunting a Property, and the Dream Home
Purchasing a home is a significant investment, but it does not have to be complicated. However, because emotions are so natural, you need to make sure you’re making reasonable decisions rather than getting caught up in the idea of a dream home—or, conversely, in the idea of oneself as a master builder/renovator. You may avoid costly blunders and purchase with confidence if you’re aware of the issues ahead of time.
In summary, be realistic when buying a new home, take your time, don’t act on impulse, and, in the end, make a home-purchase decision that is beneficial for both your sentiments and your budget.
Suggested Read: How to Choose a Good Neighborhood