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|How To Avoid The Most Common Mistakes Homebuyers Make by postbox: 10:01pm On Oct 22|
*Homebuyers have flooded the American housing market in droves over the past 18 months.
*But brokers say inexperienced buyers often make mistakes when they invest in a home.
*Agents broke down homebuyers’ biggest blunders and how to avoid them.
*This article is part of “The Road to Home” series focused on helping first-time homebuyers navigate the daunting and exhilarating process of purchasing a home.
So many, in fact, that one Zillow report estimated that some 36 million Americans traded homes in 2020 alone.
Embracing remote work and driven by the desire to be near family or enjoy a lower cost of living, homebuyers have been snapping up new residences, many fleeing to states like Texas and Florida, while others decamp to suburbs outside major metros and to smaller cities and vacation-home spots.
But while the housing market’s upheaval has stirred up bidding wars, competitive deals, and new highs for home prices, a market full of eager buyers means deals may happen quickly — but not always smoothly or in a buyer’s best interest.
With so many Americans embracing homeownership, real-estate agents are spotting buyers making big mistakes. They shared the most common ones — and how to avoid them — with Insider.
Underestimating renovation costs
“Underestimating renovation costs is a common mistake when buying a home,” the Warburg Realty agent Rebecca Blacker told Insider. “Renovation is always an estimate and can end up costing a homebuyer much more than they budgeted for.”
“It’s best to get multiple estimates from different contractors before buying the home to get a better understanding of what you are going to be spending,” she added. “Always budget for more money and more time so you are not utterly surprised down the road.”
Buyers don’t often bring the proper people to advise them on renovating an apartment in New York City, the Compass agent Julie Gans said. For example, contractors who have done specific work in Manhattan co-ops and have dealt with the Department of Buildings are helpful in determining what work a property needs.
“These are the experts that can outline how long projects usually take to get approvals and to complete,” she said. Not to mention they’re the right people to estimate costs.
Working with the wrong people
Gans said she’d seen buyers make big mistakes because they worked with the wrong professionals. Someone like a real-estate attorney, for example, should be involved. But not enough buyers find the right pros.
“They want to save some money so they decide to use their cousin in Long Island that does not specialize in real estate,” she said. “The attorney doesn’t know how to properly conduct a real-estate transaction, read the minute details, and do due diligence, and in the end the only person that suffers is the buyer.”
After all, buyers are the ones who bear the repercussions for a poorly done deal when they aren’t properly protected in the transaction.
“Buyers too often are swayed by friends, family members, and attorneys chirping in their ear as if they are experts,” the agent Karen Kostiw said. “While these people are well-meaning, generally they are basing their opinions on old news or incorrect data, and they have their own biases that don’t necessarily align with the buyers’ needs and wants. Separating your personal relationships from your buying process can be key.”
Plus, everyone’s appetite for risk is different, Kostiw said. “It’s important for buyers to have their own trusted experts and advisers who understand the market inside and out.”
Making financial mistakes
“Buyers who are not careful with their finances can err by taking on too much debt or by not budgeting accurately,” the broker Gerard Splendore told Insider.
“After closing on a property is not the time to realize that you are cash-strapped or inadequately funded,” he said. “Careful analysis with a financial advisor or accountant, utilizing spreadsheets and working carefully with a qualified mortgage broker will help to enter a transaction with full awareness.”
“Buyers begin their home search prior to understanding what they can afford,” Kostiw said, adding that it’s crucial for buyers to have a preapproval and know and understand their debt-to-income ratio and liquidity after closing (not including retirement funds) so they could prepare for home-improvement issues and life events like a sudden job loss or health issue.
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