BUYER BEWARE!
No matter which way you look at it, buying a home in the Houston, Texas real estate market is a major investment. For many homebuyers, it can be a more expensive process than it needs to be because they fall prey to at least a few of the common and costly mistakes which trap them into either:
· paying too much for the home they want
· losing their dream home to another buyer
· or worse, buying the wrong home for their needs.
A systemized approach to the homebuying process can help you steer clear of these common traps, allowing you not only to cut costs, but also to secure the home that’s best for you.
This important report discusses the most common homebuyer traps, how to identify them, and what you can do to avoid them.
BUYER TRAPS
Bidding blind. What price do you offer on a home? Is the seller’s asking price too high, or is it a great deal? Research the market in order to understand what comparable homes have actually sold for. Without that information, you are bidding blind and could easily bid too much. Similarly, you could fail to make a fair offer and risk losing the property.
Buying the Wrong Home. What are you looking for in a home? It’s a simple question with a complex answer. More than one buyer has been swept up in the emotion and excitement of the buying process only to find themselves the owner of a home that is too big, too small, in the wrong location, or not tailored to their lifestyle and needs. Maybe they’re stuck with a longer-than-desired commute to work or more fix-ups than they wanted to deal with. Clearly define your wants and needs upfront and put it in writing to evaluate every home you look at. Perform a thorough search of every appropriate neighborhood. Also, understand your financing well enough to ensure that you are not committing to something you cannot afford.
Unclear Title. Be certain to have a title search to ensure that you will own your new home free and clear. The last thing you want to discover in the final stages of a purchase is that there are encumbrances, tax liens, undisclosed owners, easements, leases, encroachments, or other limitations. Review the title commitment carefully.
Inaccurate Survey. As part of your offer to purchase, make sure you request an updated property survey which clearly marks your boundaries, and review the survey carefully for encroachments. If the survey is not current, you may find that there are structural changes not shown (additions to the house, a new swimming pool, a neighbor’s new fence crossing a boundary line, etc.) Be sure you understand the impact of building lines and setbacks.
Undisclosed Fix-Ups. Don’t expect every seller to own up to every physical detail that should be attended to. Review state-required seller’s disclosures carefully, and request any prior inspections in the seller’s possession. Conduct thorough mechanical, structural and wood-destroying insect inspections of the home, and order specialized inspections when warranted. Be careful to structure any repair amendment to ensure that the seller makes the appropriate repairs and that qualified professionals are used. Also, perform a final walk-through of the property immediately before the closing to make sure nothing material has changed with the property’s condition.
Negotiation. First and foremost, be sure you use the right contract for purchasing a home. There are different contracts for condominiums, townhomes & freestanding homes, and complete & incomplete new construction. Be certain you understand every term in the contract, and be particularly wary of any contract not promulgated by the Texas Real Estate Commission.
For successful negotiation, it is critical that you have a realistic idea of the property’s fair market value and that you understand what is normal and customary for you to request of a seller. Also, remember that sales price isn’t the only component of a contract. In addition to closing date, option periods, provision of surveys & home warranties, and financing conditions, there are dozens of terms and addenda that play an important role in completing the contract to purchase. Special provisions related to appraisal, underwriting requirements, return of earnest money, and financing options could strengthen your position and better protect you from contingencies that are not known at the time of the initial contract.
Termination Period. When possible, negotiate a period of time for an unconditional right to terminate the contract and receive the return of your earnest money deposit. During that “option period,” perform your due diligence, including reviewing any prior inspection reports and having your own inspections performed. After inspections, the termination option gives you leverage to negotiate repairs or a repair allowance.
Be certain to document receipt of any fee paid for the termination period, and provide timely, written notice of any intention to terminate the contract.
Not Getting Mortgage Preapproval. Preapproval is fast, easy and free, and you will have a better idea of what you can comfortably afford. Most sellers will require proof of funds or a mortgage preapproval. Your loan officer should discuss financing options and required downpayments. To reduce the cash you need to bring to the closing table, include a seller contribution in your contract. Ask your loan officer or mortgage banker for references. His role in meeting the closing deadline is critical, and you need a lender with a reliable track record.
Homeowner’s Associations. Prior to contracting to buy a property, determine whether there is a homeowner’s association. In addition to monthly or annual fees, associations often have deed restrictions that limit your use of the property, changes to the property, and even the number, type and size of pets you have.
Hidden costs. Be sure you identify all costs ahead of time. When a transaction closes, you will often find fees related to title insurance, homeowner’s association transfer fees, capital reserve deposits, escrows for property taxes & homeowner’s insurance, underwriting fees, and loan disbursement charges. These are in addition to the purchase price of the house. Your lender can project your financing charges for you in writing, and you will need to research other potential charges, including association fees.
Rushing to Closing. It will be impractical to review all of the documentation at the closing table, so request anything you would like to review at least a day in advance. Ensure the documentation reflects your understanding of all terms you have agreed to, including interest rate and contract terms. Additionally, be sure you have ordered your home warranty if one was authorized in the sales contract, and don’t forget to bring valid ID and a certified check payable to the title company.
Representation. Many buyers choose to represent themselves in what is most likely the largest purchase they’ve ever made. Whether buying an existing home or new construction, there are a multitude of considerations, and a buyer would benefit by having an experienced professional guide them through the process. In virtually all cases, the fees for their agent would be paid by the seller.
When engaging an agent to represent you, be certain to evaluate the agent’s qualifications, experience, and familiarity with the neighborhoods you are considering. Ask the agent for references. If you allow the seller’s agent to represent you, know that there are significant limitations on the assistance that agent can give you in the process. At a minimum, if you do not have independent representation, ensure that you are receiving some financial concession in return.
The Puryear Team of RE/MAX Metro consists of four licensed agents and additional support staff. Team leader
Donald Puryear is a top-producing broker associate and licensed attorney.
