Home prices are low, interest rates are low - real estate is basically having a summer clearance sale! But unlike buying a clearance-priced car or computer, making the wrong move in this real estate sale can have disastrous effects, from losing your dream home due to a bad bid to ending up with a money pit of a property. Here are a few money-saving, pitfall-avoiding tips and tricks for buyers who want to do some smart home shopping this summer.
1. Have a vision in place, before you start your house hunt. Actually, have several visions in place. Before buying, have a financial vision, with a clear picture of what your total income and expenses will be. In the “after home buying” view, have a vision of your life in your new home, including what you want to do, with whom and where you want and need to go. With a vision, the temptation of an ultra low-priced, but completely inappropriate home will not lure you into buying the wrong place for your needs.
2. Don’t let affordability get between you and reality. If you’ve been house hunting for months and months on end, your agent keeps trying to tell you that you should search in a lower price bracket, you have repeatedly gotten overbid or you just can’t seem to find the precise home you seek in the location and price range you seek, at least consider the possibility that you might have an outsized wish list for your budget. Take a step back, revisit your vision, and remind yourself what’s really important. It’s okay to save some “must-haves” and “deal-breakers” for your next home purchase!
3. Get a local expert (hopefully me for the OBX) to brief you on the local market, then screen out the noise. Don’t let a news story about a guy in Minnesota who got a home for $3.27 be the basis for your entire home buying strategy. Instead, ask around and get referrals to a local broker or agent who has a great track record. Using local Outer Banks realtors, like The Willey Lilley Team, gives you the opportunity to tap their knowledge of local properties. Let them use their experience with distressed properties to help get you the best deal possible. Otherwise, you’ll end up all over the place, spending your time, money and sanity attending auctions, getting worked up over distressed properties that aren’t yet for sale, trying to negotiate deals with sellers who are in no position to cut them and having your lowball offers on bank-owned properties rejected each time.
4. Read everything. Good faith estimates. Contracts. Disclosures. Inspection reports. There is a long, long list of multi-page documents that are very easy to “just sign” when you’re in the heat of the hunt and think you’re on the scent of an amazing deal. I’m not suggesting you hit the pause button for each document - rather, read things when you get them, ask questions, and keep asking until you understand the documents.
5. Stop your mental accounting and do the actual math - on paper.
On the scent of a good deal, and in the heat of the hunt, even the most meticulous homebuyer can go up a few thousand in offer price to beat out other buyers. No problem, right? Well, but then when the inspector uncovers a few needed repairs, then, when the lender requires a few extra thousand bucks than expected to close, that goes on top, but again, only mentally. So, you can see how it’s possible to break the bank. Pull out the calculator, open up a spreadsheet, and keep track of every line item, get your math mojo on!
Keeping a strict tab on the expenses you incur during the transaction - or will need to incur afterwards -- will save you so much drama later.