10 real estate deal-wreckers
Looking to buy or sell in 2006? A property expert offers 10 pitfalls for the unwary.
Those who don't learn from history are doomed to repeat it, the old proverb goes, so as the real estate market marks time before firing up again in the spring, it's a good time to mull over some of the more common things "not-to-do" to clear a trail for a happy home sale or purchase.
Here are my picks for 10 mistakes to avoid in 2006:
Not understanding the length of the buying/selling process. You know what happens when you make decisions based on optimism, time-on-the-market averages and generous promises from agents -- ye old Murphy's law kicks in. The home-selling process is often more extensive than you think, from the early planning stages to protracted negotiations to oft-delayed closings. Sellers can take months before they formally accept a buyer's offer. Financing can get held up, buyers have tough time selling their old house, rough edges discovered in the final walk-through must be smoothed, etc. Give yourself a couple extra months to complete the deal.
Exposing your hand. Never let love for a house cloud your vision. Try to contain your enthusiasm. Otherwise, the sellers and (or) their agent will know they've hooked a live one and assume you may forgive certain flaws because you know the place is right for you. You can scream "yes!" when you get back out in your car.
Skipping the loan preapproval step. For buyers, getting preapproved for a mortgage gives you a clear idea of how much you can safely borrow, plus it addresses credit-rating issues and kick-starts other financial paperwork. What's more, it identifies you as a serious buyer. Sellers with a hot property should demand nothing less than proof of preapproval from the potential buyer's financial institution. No sense in wasting time on time-wasters.
Assuming the appraisal equals actual value. In theory, appraisals are objective estimates of value. But several different appraisals can yield several different numbers. For example, an appraisal that's been done for a possible refinance may have been slightly inflated to encourage that refinance. So sellers, before you put your home on the market, have an agent do a comparative market analysis to better indicate the home's worth. And buyers, get similar "comps" from your agent. But realize the true value of a house is what someone is willing to pay for it.
Timing the bubble ‘burst.’ Thousands of apprehensive sellers and buyers have been playing this game since the late 1990s, trying to time their sale to either beat the "pop" and gain optimal profits, or to swoop in and pluck up cheap property after a burst. In almost all sections of the country, the bubble remains "intact." For the most part, real estate bubbles don't pop, they just slowly deflate and the market levels off then surges again in the near future. Always take the approach that real estate is a long-term investment.
Hiring the wrong agent. Buyers and sellers should interview several agents, small and large. Get references and success stories. You may not benefit by opting for an agency's top-volume seller. That top-producing agent may have listed 40 homes last year and sold 30, but another agent may have listed 15 and sold 14. Opting for a friend or family member who is an agent doesn't assure you of results either. It could cause a rift. And choosing the agent who suggests the highest listing price is not a recipe for success either -- nor is opting for the agent who charges the lowest commission. Remember the SEED qualities in an agent: smart, empathic, experienced and dedicated will usually get the job done right.
Missing the big picture. Opting for a dream house that will otherwise create negative quality-of-life challenges such as longer commutes, distant schools, limited access to services, higher taxes, more stringent deed restrictions, stricter homeowner associations and other chronic headache-makers can cause buyers to question their decisions after a few months. Make sure your that dream house is grounded in reality.
Not knowing what you're signing. The sales contract is a legally binding document. Review it as if your legal well-being is at stake. It should address all your concerns and the concerns of the other party, such as who will pay what for closing costs and repairs expenses. A poorly written or incomplete contract can cost you lots of time, money and emotional energy and tie up your deal for weeks or months. If there have been any verbal commitments, they should be put in writing. If you're not using an attorney, make sure your agent is proactive in the construction and interpretation of the contract before you sign it or make concessions.
Poor timing. How many stories have you heard about people drowning under the weight of two mortgages because they committed to a new house before selling their old one? The most important transaction in the "buying-one-and-selling-one scenario" is the sale. Sometimes, you have little choice in the matter, but when you do, secure the sale of the old house before signing on the dotted line for the new one. Sure, you hate to miss out on that rare find and you might have to find an interim rental, but that's better than spending time in financial limbo and biting your fingernails to the quick.
Not completing your due diligence with a criminal search. In many states, agents are not obliged to tell you if there is a sex offender or other unsavory resident in a neighborhood you're eyeing unless you ask. Do so. They tell you to do your own research. Do so. Check with your area law-enforcement agency about how to access sex-offender lists and other criminal data bases for this crucial information.