Common Mistakes New Home Buyers Make

The 2016 real estate market has been an interesting year to say the least. In the majority of markets all over the country, its been the same story: extremely low inventory of homes for sale, leading to higher home prices and affordability issues. So many traditional buyers are holding off. But there is one group that has arose to put a bright side into this 2016 market: New Home Buyers. With help from interest rates still being low and manageable. 

New home buyers are coming out in big numbers many of which are millennials and have accounted for many of sales this year. In the month of September newbie home buyers have accounted for over 30% of the total sales. Which, according to the "National Association of Realtors", has been one of the strongest months yet.  

As a real estate professional myself, I can attest that much of my business recently has come from new home buyers. And I can tell you from personal experience that this group of buyers are prone to making critical mistakes and can take a good amount of coaching to get them through to a successful closing. So here are some of the most common mistakes new buyers make:

Not Speaking to a Lender

One of the biggest mistakes first time home buyers make is not speaking to a lender first and foremost. Many home buyers also get tripped up because they do not have the financial wherewithal and experience in the mortgage process. There are a lot of variables when applying and receiving a loan to buy a home. I have seen it personally many times; a new home buyer sees a home on the web that they like and immediately schedules a time to go see it. And that's OK... Just I wouldn't get your hopes up to high yet, before you speak with a lender. I have seen folks fall in love with a home and then get pretty disappointed when they go through the pre-qualification process and find out that they do not qualify. Its always good to avoid that situation, if possible.

I have also even seen buyers with pre-qualifications from lenders in hand get turned down during the stringent "Underwriting" process. Lenders during this stage discover some detail that was not in order and the buyer ends up not qualifying. That is extra hard pill to swallow because by that point buyers and agents are pretty invested. 

Even though they are often used interchangeably there is a difference between a "Pre-Qualification" and a "Pre-Approval". A pre-qualification is a pretty quick 15-20 minute process, often online or over the phone with a loan officer, in which you give some simple details such as: income, debts, employment, assets, credit score, etc... A pre-approval goes a step further and is where the loan officer actually fully collects all the documents required and is able to verify most factors. So you and your lender should discuss which is the best option. But at the end of the day, you should always get your finances in order and speak to a lender FIRST, before you invest yourself to far into the home buying process.

Going Crazy on Credit

There is something about buying a new home that makes people just want to go on a "Shopping Spree". And its understandable, who doesn't want to start shopping for furniture and goodies for their new home as soon as they put that offer in. But it would be smart to pump the brakes there a little bit. Buying expensive furniture and goods before the transactions actually closes, can potentially be a drastic mistake and its common. First of all, if something goes south and you fail to close, you're stuck with a ton of furniture and NO HOME. One of the biggest mistakes people make is either making a big purchase or opening up NEW CREDIT during this process. What that does is interrupt your dept-to-income ration and potentially drop your credit score. So your lender sees that you have new credit or new debts, dropping your score and adjusting your debt ratios. This can cause your monthly mortgage payment to go up or even completely disqualify you from getting the loan completely. So during the loan processing phase or as some call "escrow" in some markets DO NOT make any large purchases, leases, or open any new credit without speaking to your lender first. Also, don't run up credit on any of your current cards either. Refrain from putting anything substantial on new or old credit card including but not limited to a:NEW CAR or NEW FURNITURE. 

Change or Quit Job

This is another instance that trips up many home buyers, but especially new home buyers because they haven't been through the process before and dont realize the importance of holding a job for a certain amount of time to appease lenders. Lenders all have different standards, but its pretty universal that a lender wants to see you have steady income from the same employer for a certain amount of time, at least a couple pay periods. Making a drastic change like quitting or changing jobs during the loan processing period or "escrow period" could potentially disqualify you. An important rule of thumb to abide by is just putting your life on hold during that time. Even something as simple as going on "maternity leave" can damage your chances. So always speak to both your agent and especially your lender before making any career moves, simple or life changing. 

Making a Low-Ball Offer

So many home buyers are fairly educated these days with the home buying process, or at least they think they are. But that can also be a little dangerous.With all the info available now online, combined with the countless HGTV shows out there now. Many home buyers, especially tech-savvy millennials dont believe they need an offer strategy and can get a steal of a deal. But as we're seeing with this 2016 market, all over the U.S. its a lower inventory, sellers market. Its really important to be realistic and almost put yourself in the sellers shoes. I have seen many new home buyers lose a potentially great home for them because they were not realistic with their offer. A low-ball offer certainly has the potential to backfire and offend a seller. I'm not saying it's impossible to get a good deal, but its important to be REALISTIC, work with a buyers agent looking out for your best interests and knows the market and existing "comps", as well as working together to build an offer strategy that works for your budget and goals. 

Not doing the Homework

Its important when buying a new home, especially in a new area that you do you due-diligence and homework in the neighborhood and immediate area for yourself. Many home buyers, especially new home buyers figure their agent can tell them everything that they
 need to know. Well that's a bit of a misconception, its true that agents can give you invaluable info about the house and area, but they are really limited by state-license-law to really only give facts and not personal opinions. For instance, many home buyers want to know if the neighborhood is within a good school district. Well the agent can tell you what school district the home resides in, perhaps can give you the state rankings. But they are not allowed to share their personal opinions on it. Which does make sense, what works for them, may not work for you.

I had a client with a special needs child, they fortunately did all their homework and found a the right school with the perfect program for their child. So they ended up moving from an area with a school district, which was thought to be one of the best, to an area with a more up and coming district. But it worked perfectly for them because it had the right programs that they needed and of course because they did their homework. If they just went with "what was thought to be the best", they would have missed out on those right programs. So I encourage school visits, interviews with teachers and administrators, do all the research you can. 

Its the same story about the area, neighbors, and home values. Agents can help you with some of those tasks, but some of them are up to you the buyer. Agents can certainly help you look at current home values and current trends, but they cant foresee the future and guarantee appreciation. Agents can also give you lots of good resources to look up "Crime Rates", "sex offenders", etc... But I always tell my clients to do whatever they feel is necessary. It doesn't hurt to knock on a few neighbors doors either. It may be a little awkward at first, but people love to talk about their house and neighborhood, so I'm sure once you explain your situation, you'll get a warm response. Usually a few neighbors can fill in any of the  details that you're looking for, that your agent can't really comment on.

Falling in Love with the First House

Like with any large purchase and a home will most likely be your biggest,  its pretty important to shop around and explore all your options. Its easy, especially for brand new home buyers to get caught up in all the excitement and "fall in love with the first home you see". And it may be the dream home, but you need something to compare it to, even if its just to get a better grasp of the market. I know in many markets, you may not have the luxury of taking a lot of time to decide, homes can sell as soon as or even before they hit the market. So decisions sometimes do need to be made quick. But that doesn't mean you cant preview a few homes in the same day. So see as many homes as it takes for you to feel comfortable in your decision. The more you see, the more you will learn the local market first hand. 

Getting caught up in the Emotions

I know first hand the emotions that are involved with the home buying process. Its a period that you will probably have to make some quick and difficult decisions. Its a process in which you will be most likely be spending more money on an item than you ever have before and prepare to purchase your largest asset. A home is already an emotional place on both sides of the transaction to begin with. Its a place where you feel safe at night, a place where you raise your family, and a place you make lots of memories. So emotions can certainly run high. So its important as a buyer to keep your emotions in check. In many markets around the country, we are seeing a steady level of buyers, but a decreasing inventory. So basically a large amount of buyers competing against each other for a small inventory of homes. So that is leading to a lot of "Multiple-Offer-Situations". In these situations its easy to let emotions take over and leading to overpaying or going over your designated budget. Its crucial that in any offer, whether your competing or not, that you set a designated limit and stick to it.

Not Working With a Buyers Agent

There are many buyers that feel that they are equipped enough to orchestrate their own transaction, that all agents do is just find properties online, in which they can easily do themselves. Or many feel that the best and most qualified person to deal with is the listing agent of the property you are interested in. The truth is an agent's role is to be guide and educator, a local market expert that can walk you through the entire process. They have extensive networks with homeowners, investors, and other agents and can find you deals that otherwise you couldnt. They are also able to prepare and present an offer that will actually get accepted and streamline the "pending" process as well as communication and get you from contract-to-close. Its crucial that you have a designated agent protecting your best interests, also called a "Buyers Agent". The listing agent has an exclusive contract in place with the seller to protect their interests. So that may not be the best person to divulge sensitive info, like your budget. The best part is that its the sellers that pay the commission. So your agent doesn't get paid unless he or she gets you to the closing table and when that day comes, commission fees are minimal on the buyers side because sellers pay the majority of the agent fees. 

Final Thoughts

So this is not an exclusive list of mis-steps that buyers can make. But these are many of the most common pitfalls that home buyers can face. Its always a great idea to begin the home buying process by meeting with your buyers agent and lender for a  "Buyers Consultation". This is a meeting, that many agents offer in which you can go over the process and common mistakes made before you get to far. If you have any questions about the home buying process, locally in the Greater Cincinnati area or Nationwide,feel free to call or text my team and I directly at 513-488-3372.

Search Local Listings at: http://www.aarongeorge.cbintouch.com/

Aaron George | Realtor

Coldwell Banker West Shell

Cell: 513.488.3372

Email: aaron.george@cbws.com

9106 West Chester Towne Centre Rd. West Chester, OH 45069

Top 10 Mistakes FSBO's Make When Selling Their Home

Top 10 Mistakes Home Owners Make When Selling Their Own Home

 

 

A "FOR-SALE-BY-OWNER" or "FSBO" is someone selling their home on their own, without the use of any professional representation such as a REALTOR. Many go the FSBO route because they want to save money, not paying any commission does seem pretty enticing. Some home owners feel that they have all the expertise and means needed to sell their home and don't need a professional. And others maybe just don't know where else to turn, such as not knowing a trustworthy agent, so feel like they would give selling on their own a shot until someone suitable comes along.

 

Whatever the reason for going the FSBO route, the facts are: only about eight percent of home owners are successful in actually selling their home on their own (according to National Association of Realtors) and the majority of those sales were sold quickly to a friend or relative. So if you don't have a friend or family member looking to buy a home in the very near future, you may be in for an up hill climb. If you are thinking about selling on your own, I wanted to put together a list for you of most of the common difficulties and Pitfalls FSBO's face during the process to give you an idea and help you along.

 

1) PRICING YOUR HOME

A proper pricing strategy is one of the most crucial pieces of marketing when selling a home. Proper pricing can truly determine if the sale is a success or failure. But many home owners don't understand the intricacies and strategies that goes into home pricing. Many home owners take a quick look at their homes Zillow "ZESTIMATE", base it on speaking with neighbors, or base it on what they paid plus what they paid for updates, plus some appreciation. So in turn many home owners price their home incorrectly, either to high or too low. The majority of the time much to high because they feel their home is worth more than it actual is. And it can be understandable, a home is a prized possession for most, maybe even like a member of the family, so emotions can get in the way and dictate the price. 

 

Real estate pricing acts much like a commodity, such as gold or silver in that the buying public determines the value. Real estate pricing depends on several variables such as: supply and demand as well as the buyers perceptions of the property, to name a few. Its imperative to set a competitive price from the start, something that so many FSBO's fail to do. Because the buyers perceptions of the property is at its highest in the first couple weeks after it hits the market. This is when you traditionally see the most excitement and activity around the listing and buyers perceptions go down slowly as time continues. So trying out a high price in the first couple weeks, just to see what happens is a common mistake and one of the worst things you can do if you're serious about selling. Something to keep in mind is that every home in any market has a range of value of about 10%. Home prices are not Fixed. That without a proven system and marketing plan the sale is doomed to the lower end of that range. Which could result in tens of thousands left on the table.

2) LACK OF EXPOSURE

When we talk about exposure, we're really talking about the homes online exposure. Everyone in todays tech centered world is on the web and home buyers are no different. Well over 90% of home buyers start their home search online. So its become absolutely crucial that you maximize your online exposure, its really become your "First Showing". But its tough for FSBO's because there is a limited number of sites that allow you to post a For-Sale-by-Owner listing, especially for free. Others can cost you a decent sized premium to allow you to post your listing. So its extremely tough for FSBO's to get the adequate exposure online that it takes to sell in todays market and compete with traditionally listed homes. So home owners have to make the decision where to market their home and how much to spend, budget wise on web based marketing. Something that can be very difficult without any experience. Its also very important to market to agents, they are the ones working with the high majority of qualified buyers, so not being on an MLS system, where agents can view the property can hinder the sale as well.  

 

I'll put at least one agent plug in here...This is where hiring a professional can really benefit. Good agents can put together a comprehensive marketing plan that includes, but not limited to: adding your listing into the MLS as well as hundreds of subsidiary real estate web sites such as: Zillow, Trulia, Realtor.com, and Homes.com just to name a few. They also have extensive networks of current buyers and contacts. Most importantly, agents have the experience and resources to know what marketing is necessary and this goes into other more traditional marketing aspects as well: open houses, print, etc...

3) NEGOTIATIONS

Real estate negotiating can truly be an art form and takes a good amount of experience to understand all the nuances. If you do get an interested buyer, certainly both parties want the best deal, so negotiating not just over a fair price, but fair terms, and what's included in the sale of the home can be challenging, especially with little to no experience. You can also be approached by an agent representing a buyer and negotiating with an individual who does this for a living can certainly be intimidating. Even though this may be intimidating, I still would highly recommend working with "Buyers agents", even encouraging it. They are the ones working with the majority of local qualified buyers and not working with them shuts you out of a large pool of potential buyers for your home. Buyers agents also have access to all the proper documents and contacts to keep the deal running smoothly and legitimate.

 

But unfortunately buyers and buyers agents are just the beginning when it comes to negotiating, there are: home inspection companies and even appraisers in many deals to also deal with. So it does pay to have experience in this field and someone looking out for your best interests.

4) GETTING YOUR HOME READY TO SELL

 

Depending on your market, getting your home "Show Ready" can be a crucial step in the pre-listing process. But many home owners don't know the proper steps to take. They either do little to nothing or way to much, such as full restoration, and in turn have to overprice the home to make up for it. In most cases just following simple "staging strategies" such as following the 3Ds: De-Clutter, De-Personalize, and Deep Clean can have a major impact with potential buyers. Also, doing some simple cost effective renovations such as fresh paint, new flooring, fixing minor repairs, and new light fixtures can pay off immensely. This is an area were many agents can help you, they are the ones working with and showing buyers homes and keeping up with design trends. So they have a good grasp on what buyers are looking for and key in on. Keep in mind when selling a home, there is only one chance to make a "first impression".

 

5) UNDERSTANDING THE PAPERWORK

There are quite a few documents involved when selling a home. That is why if you are selling on your own, its highly recommended that you have an attorney help you with the paperwork aspect of the sale. I know attorney fees aren't cheap either and the whole point of this is to save money, but it pays to be protected when selling probably your biggest asset. Just the "Purchase Contract" alone deals with much more than just the "Price". Real estate contracts often have strict timelines and clauses. They also have common contingencies involved such as: inspections, appraisals, and financing.

 

Most "For-Sale-By-Owners" don't fully understand the intricacies of the contracts and the other documents involved. So they may not grasp what they are agreeing to or how to negotiate certain parts of the contract. That is why it pays to have an attorney as part of your team or hire an agent.

 

6) SCREENING BUYERS AND CAPTURING THERE INFO

 

As a professional in the real estate industry I can attest that "Screening" calls from potential buyers and capturing interested buyers contact info is an effective and very crucial step in the home selling process. Its as simple as just having a natural conversation and asking a few questions and people have no problem sharing, trust me. Its so important to find out the buyers goals and motivations before you go to far. So asking such questions as: "how long have you been looking", "when would you like to buy" or "have you reached out to a lender" are great questions to ask during that initial call. Here is a complete list of questions to "Pre-Qualify buyers from Realtor Magazine. Don't feel like you have to ask every single question in order, just enough to get a good sense of their motivation and level of interest. And again, try to fit these question into a natural conversation. As a "For-Sale-By-Owner, you will get approached by Un-Qualified buyers looking for some sort of special financing such as: lease option, lease-to-own, or just a traditional lease. Its not an "if" its a "when". If this is not your goal than this is where pre-qualifying buyers before hand becomes even more important. There are also many savvy investors out there looking for good deals and to possibly take advantage of your lack of market knowledge and experience. They can also be very good negotiators, so its good to look out for that scenario as well. Sadly, one other group you need to look out for is "Scammers". Real estate related scams have always plagued the industry in some fashion. Its important to keep your eye out and always trust your gut, if it doesn't sound right or to good to be true, it often is. Common scams often involve; paperwork, earnest money, bad checks, out-of-state/international transactions, and collecting sensitive personal information.

 

That brings us to "capturing Info". Its pretty self-explanatory. If you do find a serious and interested party, its a good idea to simply ask for a good way to stay in touch whether its a phone or email or both. Professional agents have extensive 'Contact Management Systems' to keep track of their leads. For your purposes, its ok to go a little more low tech. Just have a central place like a notebook or spreadsheet to write down some contact info, names, and some facts about them. You can use that to continue to stay in touch with them, update them if you have a special event such as an open house, update them with a new renovation or repair, perhaps a price reduction, or maybe just checking in. Whatever it may be, its important to stay in touch because they showed interest, but maybe were not quite ready to write an offer. Which is common, buying a home is a big decision and buyers may need some time to think and get their ducks in a row. Staying in touch with buyers throughout the process is key.

 

 

7) COORDINATING SHOWINGS AND OPEN HOUSES

 

There is that myth that agents just drive around in their beemer's or sit around and at the end of the day collect a big fat commission check. But the reality is that much of a listings agent time is spent fielding buyer inquiries and coordinating showings for the property, as well as following up and collecting feedback. One major reason a "For-Sale-By-Owner fails to sell is that they don't have the time or resources to handle the inquiries that come in about their home. Also they don't have the availability to coordinate showings. Buyers in todays market almost expect immediate gratification, they want a quick response on their inquiry or they will likely move onto the next property. Whether the homeowner has a full-time job or just simply bad at answering their phone or email. Also, when it comes to showings buyers always pick the most random times to see a home. So you almost have to be available 24/7 to both answer property inquiries and show the home.

 

8) UNDERSTADING THE TIMELINE AND PROCEDURES

 

Receiving and accepting an offer on your home is just the beginning of a real estate transaction. After an accepted offer on a piece of real estate there are many steps and procedures involved before closing that follow a certain timeline, with often several different parties involved. This is often where an inexperienced seller fails. They don't understand the different steps, the streamlined communication that needs to take place to all the different entities, and basically who should be doing what to complete the transaction. Here are some of the major steps that need to take place in the majority of deals:

• Buyer obtains and provides a written mortgage commitment
• Earnest money collected and held by a predetermined party
• Inspections are completed within an allotted time
• Repairs are requested, negotiated, and completed within an allotted time
• Appraisal is ordered and completed
• Attorney approves contract
• Title work is review and completed
• Closing is scheduled

 

9) DEALING WITH INSPECTIONS

The high majority of buyers elect to conduct an inspection after an accepted offer and there are several reasons why they absolutely should. I highly recommend it to every buyer I work with. Its probably the biggest purchase of their life, so they want to know exactly the condition and what they are getting into. But this is often an area where a FSBO fails because they don't know how to exactly handle the process and findings. In my time as a real estate professional, I have never seen an inspection of a home come up empty. The likelihood of an inspector finding some issues is pretty high, even "new construction" homes have their fair share of issues. Certainly, there are homes that will have more than others, but you have to expect some. The issues usually begin with the emotions that are involved. Most homeowners have a pretty high view their home and that it holds a pretty special place in their heart. Some homeowners even believe that there is nothing wrong with their home. So when issues are founds and repairs are requested, it can be hard for homeowners to take. This can often lead to sellers refusing to make repairs, which is a great way to scare away a buyer and end the transaction. What homeowners need to do is attempt to separate the emotions from the deal and look at it like a business transaction. Usually keeping the deal alive and putting in a few bucks to do some minor repairs makes more sense than starting over. Like I mentioned in the above section there also is a specific "Timeline" that is also involved with inspections. Its crucial to make sure inspections, negotiations, as well repairs are all completed within the allotted time highlighted in your contract.

 

10) NOT WORKING WITH AGENTS

 

Real estate agents are the ones working with the high majority of qualified buyers already in the area. So working with and allowing buyers agents can be a HUGE benefit and really help you sell. So this is, yet again another reasons why FSBO's can fail. I can tell you as an agent myself, in a few of my dealings with FSBO's, simply reaching out, often because I had an interested buyer, I was read the riot act and told to "not contact them again". Well it goes without saying, my buyers moved on and purchased elsewhere. This of course is not every FSBO, but a few for sure. But many homeowners do see the benefits agents can provide, even if you're representing yourself. If you do agree to work with buyers agents, it can truly be a smart idea. You as the homeowner will still be saving because you are only paying half the commission, just to represent the buyers. So 3% doesn't sting quite as much, if you're hell bent on saving money. Here is why its a good idea to include agents. Number 1: it opens you up to a huge group of potential buyers. Number 2: buyers agents come with all the paperwork, resources, and experience to close the transaction successfully.

 

So if you do decide to work with buyer agents its a good idea to include that fact prominently in all your advertising and marketing, especially online, so they know they're welcome. Its also a good idea to actively market to agents as well. Again, they have huge networks of active buyers. So create specialized ad campaigns just for agents, such as emails and sending flyers to different local brokerages. Many of agents are more than willing to help, so don't hesitate to leverage their knowledge and expertise.

 

 

 

FINAL THOUGHTS

 

Most homeowners don't expect the sale of their home to be easy, but many are astonished just how difficult it really can be, especially selling for a good price in a decent timeframe. Many of these frustrations can be avoided with a little preparation and information. There are plenty of pitfalls and challenges FSBO's face during the sale of their home, but I wanted highlight 10 that I thought were the most prevalent. My main goal is to educate and empower homeowners to make the right moves and decisions, as well as trying to help them avoid common pitfalls.

 

Its important to realize that yes, it would be nice to save 6% on selling commissions. But in most cases REALTORS are capable of adding at least 10-12% to the sales price. Even though there are certain circumstances in which the FSBO approach makes sense, most owners are better off hiring an agent to handle important tasks like preparation, showing the business to potential buyers, marketing and negotiations. Agents can save you time and headache, take on liability, and most importantly, the majority of time "Put More Money into your Pocket".

 

 

FREE HOME VALUATON ONLINE:

http://aarongeorge.cbintouch.com/sell/

 

 

 

 

Aaron George | Realtor

Coldwell Banker West Shell

Cell: 513.488.3372

Email: aaron.george@cbws.com

 

 



9106 West Chester Towne Centre Rd.

West Chester, OH 45069