An article recently appeared on GoBankingRates.com titled “7 Mistakes to Avoid When Shopping for a New Home”, – and the article provides several helpful tips for first-time buyers. The article can be found here: http://www.gobankingrates.com/mortgage-rates/7-mistakes-avoid-shopping-new-home
According to the article, the common mistakes first-time buyers make (and tips for avoiding those mistakes) are: 1) treating your home like a short-term investment, 2) comparing your rent to a mortgage payment, 3) maxing out your loan, 4) not planning ahead, 5) taking too long to make a decision, 6) failing to shop multiple mortgage brokers, & 7) trusting online home values.
I found items 5), 6) & 7) particularly relevant for Seattle area buyers – and I think are worthy of additional discussion:
A Little Creative Vision Can Go a Long Way & Help You Make a Better Investment:
With the low inventory of available homes for sale in the Seattle area & the market not able to keep up with the demand from interested buyers, it is crucial that buyers tour homes quickly after being listed – as many homes are selling in just a few days, or less than one week's time. But in addition to being quick, buyers who are able to have a some creative vision & who are willing to make a few simple improvements after purchasing just might have a few more options when it comes to buying. Further, those buyers with creative vision might be able to purchase a property at a better price than shoppers only considering homes that are fully updated & 'move-in ready'.
An increasing number of Seattle area homes are now being professionally staged prior to hitting the market – and while shopping, it can be easy for some buyers to focus on the staged & more attractive listings – and ignore another house of comparable quality, particularly when the comparable home lacks attractive décor & has less than flattering listing photos. Yet, as a buyer, if you’re able to have some creative vision & are willing to make some simple, inexpensive updates after purchasing, such as new paint, new carpet & possibly new fixtures or cabinets – you might have a few more options & you might be able to get the less competitive home for a much better price (rather than competing with several other buyers in a bidding war for the attractively staged home). If you’re open to the idea of making a few improvements, but need some help seeing a potential diamond in the rough, your broker should be able to help you sort through which homes merit your attention – and your broker can even go preview some of the less attractive listings for you, so you don’t waste any time touring unworthy candidates.
Shop Around for a Lender:
Since interest rates are still near all-time lows, it’s a great time to get a home loan & maximize your purchasing power. But to fully take advantage of the low interest rates and select the loan that best suits your needs, you should should shop around before selecting one lender.
Some of the larger, national banks can provide the most competitive rates – but can also have more red tape during the loan process, might need more time to issue the loan & complete the closing process. Some mortgage brokers or smaller, local lenders might have higher loan fees, or might not be able to give you the lowest rate, but they may be quite reliable, have an excellent reputation & they might be able to close on the loan much quicker – which can be critically important if you are competing with other buyers for a certain home. When reviewing multiple offers & selecting the winning offer, many sellers will look at the reputation of the lender you are using & the length of the closing date on the contract – so even the lender you select can impact your chances of getting a home, not just the price you are offering. Thus, depending on your finances, what area you shopping in & at what price point, it might be more beneficial to go with a local lender as opposed to a larger, national lender.
Your real estate agent can be a great resource for recommending a lender that might best suit your needs – and of course, ask your friends, colleagues, or relatives for any recommendations, particularly if they recently purchased or refinanced their home loan.
Get an Expert’s Opinion on Price Before Making an Offer:
Online real estate sites can be an excellent resource for home shoppers & interested buyers. And many of these real estate websites will provide an ‘estimate’ or ‘valuation’ for a particular property’s worth – however, buyers shouldn’t rely on the accuracy of the estimates on these websites as being fool proof – and more importantly, buyers shouldn’t base their offer price solely based on the data provided on these online websites.
These online sites will use a variety of different data sets & different mathematical equations to determine a home's 'value', but these statistics & equations do not take into consideration any specifics of the particular home – and these online values can fluctuate quickly & dramatically. For example, I know one homeowner who saw an online site show a $40,000 drop in his home's value overnight – and the following week that value had inched up by $15,000. Thus, buyers using an online website as their sole resource for determining a home's value – might see one property being valued as $20,000, $30,000 or $40,000 higher on any particular given day, week, or month – but unexpectedly, that website might have the home’s valuation taking a sudden dip. Thus, if you were purchasing a home based on a website’s determination of value – you might not find much comfort waking up to find your home was now 'estimated' at $30,000 less than what you had paid for it just one week prior.
Before making an offer, ask your real estate agent to complete a market analysis for the home you are interested in buying – and have your agent provide an explanation of the analysis, along with examples of the recent & comparable sales. If working with a skilled agent, your agent should have a solid understanding of the market, will have toured the previous comparable sales in the area, and your agent will also understand the other specific factors that will impact the home's value (such as recent improvements & additions to the home, demand in the area, reputation of the school district where the home is located, etc.) Basically, online real estate sites can be a great tool for buyers – but when submitting an offer – online valuations should never be used as the only guidance, or determining factor, on price.