Because of the internet and technology home buyers have become a lot smarter these days. However I continually see buyers still making some very costly mistakes so I listed some of them below.
1. Start shopping for homes without getting pre approved for a mortgage-this is a very common mistake I still see buyers making. Why? Emotions! Buying a home is an emotional event, of course there are financial decisions involved but the first thing buyers plan for is what type of home fits their needs and dreams and what neighborhood they should buy in. They may assume they can get approved for a mortgage or they may have even been pre qualified with a bank or broker but being pre qualified is very different than a pre approval. Pre qualification focuses mainly on debt to income ratios (total housing payment + monthly obligations divided by gross monthly income) than it does a pre approval which involves a thorough review of credit, income and assets. Before you can dream it is crucial to have a plan and that plan should definitely include a pre approval. The mortgage industry has changed dramatically over the past few years and it continues to change daily as underwriting guidelines get tighter and tighter. Don’t waste your time and emotion without having a “reality check”. Get pre approved first!
2. Calling the name on the sign-this is a BIG mistake! Why? When you call the name on the sign you are most likely calling the agent representing the SELLER! That agent has a contractual agreement with the seller and a fiduciary responsibility to make sure their client gets the best possible price and the most favorable terms possible. So is that the person you want representing you? How can they represent your best interests and the best interests of the seller simultaneously? That is what is called dual agency and is absolutely legal if it is put in writing and both the buyer and seller are both crazy enough to allow it. My question to the agent and to you-is it worth the risk? Don’t call the name on the sign, interview a number of agents and hire one as your buyer agent.
3. Attending open houses-so Phil are you telling me I can’t go to Open Houses? No, that is not what I am saying! However attending an open house puts you in a vulnerable position if the agent sitting at the open house is representing the seller. Remember they are NOT representing your best interests. My advice-hire a buyer agent and attend all the open houses you wish, when you attend one simply state that you are working with a buyer agent. When I say “hire” a buyer agent you may be confused and assume that you will pay a commission to that agent directly, that is not the case, a buyer agent is only compensated when a property is sold and he/she is paid from the seller’s commission agreement with their listing agent. For example if the seller contractually agreed to a 6% commission, typically 3% would go to the listing agent and 3% would go to a buyer’s agent. So don’t go to an open house until you have hired a buyer agent.
4. Not being on the ‘same page’-probably the biggest waste of time for an agent and a home buyer is when the couple, fiancé, family member, or significant other are not on the same page. The disagreement could be on price, style of home, school district, neighborhood, etc. Please get on the same page so you don’t waste anyone’s time, most importantly yours!
5. Rate shopping-especially on-line-this is probably the most costly mistake. Home buyers are taught to choose their mortgage provider by whoever has the lowest rates and fees. In my opinion that is secondary to customer service and ability to get your loan approved and funded. It is important to know when you shop via interest rate the mortgage lender or bank will quote a rate that cannot be honored unless a property has been found and an agreement of sale has been fully executed by both buyer and seller. A good mortgage lender will not simply quote a rate and provide you an estimate, they will take time and completely educate you on all the options available and review the entire loan process from start to finish. So DO NOT choose your lender based purely upon rate and fees, if you do you could end with major hassles and possibly a delayed closing or none at all!
6. Choosing the “in house” providers-I might get in trouble for this one! Many real estate companies including the company I am affiliated with have “in house” or 3rd party companies to assist in real estate related services. For example many will have a mortgage company, title company, possibly a home owner’s insurance provider, etc. Over the years I have found that many of the sales people or agents representing these companies are not really qualified or do not have the expertise to give you great advice and exceptional service. It is not always in your best interest to use the “in house” companies, do your homework, and if you are feeling pressure from your Realtor to use a specific provider that is definitely a “red flag” unless the “pressure” is because the in house people are awesome and they do a great job. Remember choosing mortgage and title providers are YOUR choice!
So hopefully this has helped someone NOT make these mistakes. It is really important to have an agent representing you and your best interests from start to finish when you are buying a home. If I can help you set up a plan and execute a home buying plan or if I can just answer any questions I am available.