Way back in the dark ages, before the Internet, when I was in school, I remember some of the sayings I heard my teachers and older relatives use. One of my favorites was "Penny wise and pound foolish." Now a penny used to go a lot further than it does now. But you get the idea, save a little on something of limited value, but loose a lot more on something of greater value or substance.
Between guests at my Open House today in Shavano Creek, I thought of a few real estate and property owner issues that fall into the penny wise-pound foolish area.
Conducting A Home Search Without an Agent or Guide
As a buyer in Texas, you hardly ever pay for the services of an agent. The agent must place the buyer's needs above their own. When informed of the buyer's needs, the agent can locate homes that fit the profile you specify, save you time, point out potential problem areas, negotiate price and terms on your behalf, and shepherd the transaction to close.
Now the Internet gives buyers an opportunity to see potential homes without an agent, but many Internet sites display homes with outdated information. If searching for your next home is a fun activity, and time is not an issue, going it alone is as good a way to spend time as anything else.
"Penny wise and pound foolish", and it's not even your penny.
Declining to Use a Licensed Inspector
If the buyer is a competent contractor, familiar with all the systems and components of the house being considered for purchase, maybe it's OK to do the inspection without paying for a licensed home inspector. Just because you use an inspector does not mean the seller will repair or upgrade any deficiencies. What it does is alert you, the buyer, to areas that may need to be addressed. This information can then be factored into you strategy for closing the deal. Forewarned is forearmed. (Another classic phrase.)
"Penny wise and pound foolish", sure you save the cost of an inspection, but what don't your learn about the property?
Reducing Home Insurance Coverage
If you own a home, and you believe the value of your home has significantly declined in value, there may be a temptation to reduce your insurance coverage to the current market value. Probably not a good move. You can save a few dollars, but remember, your insurance is to be used to replace or rebuild your property for covered losses. Even though market value may be down, the replacement costs for the home are probably up. So you might save some on the premiums by reducing the value, but if you have a loss, and your coverage does not cover the expense necessary to rebuild, this would fall into the "penny-wise, pound foolish" situation.
Feel free to add to the "Penny wise and Pound Foolish" list of examples.
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