Real Estate for Today’s Magalia and Paradise California Home Sellers and Home Buyers

Top 10 Home Buying Mistakes

Buying a home is perhaps the most arduous, expensive and, ultimately, valuable acquisition you'll ever complete

Just one mistake could mean disaster -- perhaps the worst mistake you'll ever make.

In order to avoid titanic trip ups during such a trying transaction, Paradise and Magalia buyers should get to know the most common home buying blunders.

To know them is to avoid them.

  • Going solo: Buying a house is a complex transaction. It should be a team effort. You'll need a REALTOR®, lender, inspector, insurer, perhaps a lawyer, and other team members to help you through each step of the way. Team build before you start the search.

  • Love at first sight: If you believe in fairy tales you probably shouldn't be buying a home. You won't live happily ever after if you emote your way through the home buying process. Your home should fit your real needs, not your yen for drama. Buy a home that fits your budget and your lifestyle. Be sure the home is in a community and neighborhood you desire. Visit neighborhoods several times before you buy to check out schools, noise and traffic patterns.

  • 'Loanless' shopping: Being pre-qualified gives you a general idea of how much you can afford to borrow. It's better to be pre-approved for a given loan. Sellers will take you more seriously. You'll stay on budget.

  • Overbuying: Home buyers buying more than they could truly afford, in part, led to the collapse of the housing market. Buy more than you can afford and your dream home will become the same nightmare. Analyze all your monthly costs including debts, food, transportation, entertainment, and savings. Your total monthly debts, including your mortgage, should not exceed 36 percent of your income before taxes. Don't forget to budget closing costs (often two to five percent of the home's purchase price), plus moving, redecorating and maintenance. Look ahead and allow for increases in ongoing expenses such as utilities and taxes.

  • Misplaced trust: You are engaged in what's likely your most valuable acquisition ever. It's a business transaction. Ask family, friends, co-workers, professionals and others you trust for referrals, but don't take their word for it. Vet your team members.

  • Accepting oral agreements: Get it in writing. The rate lock, the home inspection, disclosures, the contract. Always. Should a dispute arise, you've got the details documented.

  • Skipping the fine print: Understand what's really in any document before picking up a pen. Get documents in advance, take time to read them and ask questions. Get copies of your mortgage and closing papers a few days ahead of closing.

  • Forgetting or betting on resale: Avoid buying a home that costs 50 percent more than neighboring homes. Reconsider buying the most expensive home on the block. Neighbors' lower home values will weaken yours. Buy intending to flip your investment only to have the market fail means when it's time to sell your price may not cover your costs.

  • Making an unconditional offer: Protect yourself with these contingencies:

    1. Mortgage financing: You may be preapproved but is the house? A formal appraisal confirms -- or not -- that there is sufficient value in the home to warrant the loan. If the house appraises lower than the sales price, the loan may be declined.

    2. Inspection: Never buy an existing or new home without a thorough home inspection. Walk through the home with the inspector to learn more about the house and any concerns he or she may have.

    3. Insurance: Confirm you can get adequate insurance coverage. In some areas, or following certain disasters, it can be difficult to get types of hazard insurance.

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    Common Misconceptions Among Home Buyers

    Misconception: If you pay list price, you're paying too much.

    If you don't know what the current market value is for homes in the area and whether the market is appreciating or depreciating, you don't know what a fair price is and you're likely to miss out on a great deal by trying to low ball a house that's already priced well.

    If the house meets your goals, is within your budget, and is priced competitively, it's a bargain and you should make a strong offer. Get assistance from a professional to help you recognize a good deal and grab it before it's gone.

     Misconception: Foreclosures and short sales are the best buys. 

    Many buyers find out the hard way that foreclosures and short sales are full of headaches, may need extensive repairs, require great patience over an extended period, often don't have the criteria that's most important to you, and may never close.

    Short sales abound in Butte County and many people are starting to avoid them because the pain isn't worth the gain.  Foreclosures can be less troublesome, but often in poor condition with challenges that may take longer than normal to resolve.  Market prices have corrected in many places, including Butte County, and it's possible to find great deals in homes that are priced like short sales, but don't have the headaches.

    Misconception: You get a better price if you buy directly from the owner.

    Bargain hunters sometimes avoid Realtors, thinking that they will get a better price if they buy directly from a FSBO.  Meanwhile, the sellers are also trying to save on the commission, so they're not getting expert advice either and often price their homes above market value.

    The end result is often that a buyer pays too much or the FSBO is unable to get the house sold. A savvy Realtor working on the buyer's behalf, armed with market data and great negotiation skills, is much more likely to get a great deal than buyers can by negotiating for themselves.

    If you're buying a house, it's a great idea to find a good Realtor and listen to their advice.