No matter how you look at it, buying a home is a major investment in your life. For many buyers, the process can be much more expensive than it needs to be if not properly prepared.
A systematic approach to the home buying process will help you avoid these common pitfalls. First, it will not only help you cut costs, but it will also help you buy the home that is right for you. This section outlines the 9 most common and costly pitfalls that homebuyers fall into, how to identify them and what to do to avoid them.
1. Buying blind
What price should you offer when you make a promise to purchase a property? Is the seller’s asking price too high or does it represent a good investment? If you haven’t researched the market to understand comparable values, you’ll be making your offer on a blind gamble. Without this market knowledge, you could easily overbid or miss the opportunity to make a competitive offer on a home that is worth its weight in gold.
2. Buying the wrong property
What are you looking for in a property? A simple question with a complex answer. In fact, many a buyer has been caught up in the excitement of buying a new home only to discover that he or she is too big or too small. Take the time to clearly define your needs and desires. Write it all down and use this list to evaluate each home you visit.
3. Legal issues
Take your time at this crucial stage and insist on reviewing all documents the day before signing. Make sure the documents reflect your understanding of the transaction, that nothing has been added or subtracted. Is the interest rate accurate? Has everything been covered? If you rush things on the day of the signing, you may find yourself at an impasse at the last minute, with no solution in hand, and jeopardize the terms of the agreement, the financing or the sale itself.
4. Non-conforming designation
In your promise to purchase, be sure to ask for an up-to-date certificate of location that accurately describes the property boundaries. Affectively, if this survey is not an exact reproduction of the current reality, for example, if the extension of a balcony or the addition of a pool is not included, this certificate will not be accepted by the bank. Be very clear and firm on these issues.
5. Undisclosed repairs
Don’t expect a seller to give you an exhaustive list of everything that needs to be repaired or checked. So make sure you do a thorough home inspection early in the process. Hire an independent inspector to objectively examine the house and make the purchase contract conditional on the inspection report. The inspection report should include details of all the elements of the house and any necessary repairs.
6. Not to be pre-qualified
A mortgage pre-qualification is quick and easy to obtain. And free. When you have that mortgage already in place, you store stress-free and secure, knowing you’ll be ready to act when you find the home of your dreams.
7. Breaches of contract
If a seller does not comply with the letter of the contract by neglecting to make the repairs he promised to make, or by changing the spirit of the contract in some way, this may result in a delay in signing. This is why you should agree in advance on a compensation amount if, for example, the repairs are not made as promised. Make a list of the points you have agreed upon and keep careful track of the progress of each step.
8. Hidden costs
Make sure that you have identified and uncovered all of the costs that arise from the sale – large and small – well in advance. Sometimes, when a deal closes, unexpected costs “pop up” after the total amount has been determined: releases, dues, etc. Ask the seller to provide you with a written statement of all the fees and charges that will be your responsibility.
9. Precipitate the signature
First and foremost, make sure at the outset of the negotiations that you will get irrefutable proof that the house is owned by the sellers, that it will be free of any mortgage or legal liens, and that a full title search will be conducted. The last thing you want to find out is that the property is not free of any liens or encumbrances, or that there are other owners, or that leases have already been granted.