Dallas home buyers don’t buy a house thinking they will lose it to foreclosure farther down the road. But poor buying decisions lead to difficulty when you are ready to turn around and sell. What do I mean by this…making the bad decision to buy a home on a major road even though the price was a steal? Or foregoing a home inspection because the sellers seemed like nice people and said there were no problems with the house.
Many Dallas homes buyers study the market; ask questions, hire pros, yet even so, some are headed into foreclosure before the ink is dry on the deed.
Here are About.com’s 10 fool-proof ways you can, without meaning to, set yourself up to fail at home ownership:
1. Attending No Money Down Seminars
Start by calling that toll-free phone number to make a reservation. Then sit through a three-hour sales pitch for books, tapes, CDs and specially discounted services hawked by seminar gurus who most likely never bought or sold a piece of real estate in their lives but are getting rich off the backs of their naïve audience. Then go out and make dozens of lowball offers that get rejected until you find a seller who will carry all the financing at 18% interest with a 3-year balloon payment.
If you stop and think about it, if the tactics they teach at these seminars actually worked, every real estate agent in existence grabbing up the good deals and getting rich quick.
2. Choosing Bad Agents
Believe the premise that all real estate agents are the same because they all hold a real estate license. Do not interview your agent because you don’t want to offend by asking hard questions. Hire the cheapest and most eager agent you can find, regardless of experience, because that agent will work harder for you. In fact, ask your newly licensed brother-in-law to represent you. Refuse to sign a buyer’s broker agreement.
Above all, after your agent has shown you homes for several weeks, go directly to the listing agent of the home you decide to buy and ask that agent to write a purchase offer for you.
Always interview at least 3 agents before deciding on who will help you with the purchase of the biggest investment of your life. Look for experience and a track record. Never work with relatives…it makes thanksgiving dinner very awkward!
You won’t get a better deal by contacting the listing agent directly. He/she is looking out for the best interests of the seller and not YOU!
3. Wiping Out Savings
Put every cent you can scrape together into a down payment for your new home. Beg or borrow money from relatives to pay your closing costs, which will barely let you squeak by an underwriter’s scrutiny, but at least you have equity walking into the deal. If you’re short on funds, tell yourself that you’ll make it up out of next week’s paycheck and make a cash withdrawal on a major credit card. Plan on charging all repairs and future maintenance to that credit card as well.
Make every effort to clean out all sources of available cash, dumping every dime into the purchase of your new home. In fact, why not cash in your retirement accounts, too, because retirement is a long ways off.
Your dream home can feel like a prison very quickly if you make yourself ‘house poor’ in the process. There are always unexpected expenses that arise after you close on a house. Leave yourself a contingency fund and some money to be able to go out to dinner to celebrate!
4. Refusing Professional Advice
Realize that regardless of what your agent or mortgage broker tells you, professional sales people are only interested in closing the deal. They want your money into their pocket as fast as they can get it and nobody cares about what happens to you, except you, which makes you an authority. What you do not know, you can ask Uncle Joe to explain, since he owns a home and you do not.
Don’t bother looking up information on the Internet, reading real estate books or asking for a second opinion as all of that is a waste of time. Whatever you do, do not, under any circumstances, ask a lawyer or an accountant for advice. If you receive professional advice, disregard it and do what you think is best.
You probably wouldn’t consider having major surgery without consulting at least one medical doctor and probably more. Don’t consider making the biggest purchase of your life without consulting professionals. They will be able to provide you with more credible information and help you process that information better than the pizza delivery man.
5. Choosing Exotic Financing
The lower your monthly payment, the more money you will have leftover every month to spend on other things. Besides, appreciation is the only way to build equity in a home; you do not need to pay down the principal balance of your loan. Make sure you shop for the lowest interest rate you can find, even if it means the rate will adjust later on. Don’t pay any attention to a Good Faith Estimate — it’s just jargon. If you don’t understand the terms of your loan, shrug it off.
You know there is no reason to be concerned with silly terms such as indexes, margins, caps or negative amortization. Because you have a low interest rate, a low monthly payment, and you feel confident that whatever happens later, you can handle.
My father always told me never to sing anything I hadn’t read. Also, don’t sign anything you don’t understand and haven’t looked at the worst case scenario.
6. Picking Wrong Neighborhoods
The three most important words in real estate: location, location, location, are a joke to you, but you never got the punch line. Besides, driving through a neighborhood will tell you everything you need to know about an area. There is no point in asking the police department about crime statistics or talking to neighbors before you buy.
To you, living next to a grocery store means you can pick up a carton of milk without walking very far. Even though a few boarded-up homes on the block sport rotting mattresses in the front yards, it doesn’t affect your market value.
You can instantly recognize a good buy when you find it, especially if it’s priced thousands less than homes in neighborhoods you’ve considered but cannot afford.
Drive through the neighborhood a various times of the day and night and take a look at what is going on. Visit the local police station and ask about crime in the area. Realize if there are cars up on blocks in front yards and run-down properties, there is probably a reason for the low price on the house you are considering buying.
7. Choosing Most Expensive Homes
The most important factor to consider when buying a Dallas home is to make sure your home is the largest and most expensive home you are pre-qualified to purchase. You will derive great pleasure in bragging about your elaborate new home to friends and family and want to make sure your home is impressive. There is no such word as compromise in your search for a home. If you need three bedrooms, a five-bedroom is better, even if the home that fits your needs costs less.
The more bells and whistles it has, the more you will love it. As far as you’re concerned, you can’t be stretched too thin if every single design element of the home is perfect for your tastes, and you’re willing to reach higher than common sense dictates to get it.
No home is perfect…even the custom built homes designed from scratch by the owners! Compromise is part of the home buying process and we all learn to prioritize what is important.
Conventional wisdom says, ‘it is better to be the smallest house in a more expensive neighborhood than to be the largest house in a lower priced neighborhood.’ Let those larger, higher priced homes pull your property values up instead of the other way around.
8. Passing Up Home Inspections
Everybody knows that home inspections are a waste of money and time. There is no known default in a home that can’t be spotted with your own eyes, and qualified home inspectors aren’t going to conduct any visual inspections that you can’t do on your own. If a home has four walls, a roof and somebody is willing to occupy it, you can fix any minor problems that surface later on. Besides, suing the seller and everybody involved in the transaction after it closes is always an attractive alternative.
You would prefer to save the money you would throw away on a home inspection and instead buy a new barbecue grill. It doesn’t matter that the interior walls are crumbling because a fresh coat of paint works wonders.
During the strong seller’s market of a few years ago, many ___________ home buyers by-passed home inspections. It was a common occurrence during that time, but times have changed! Buyers have more leverage and negotiating power. A home inspection might save you thousands of dollars in unforeseen repairs.
9. Altering Financial Pictures Before Closing
Now that you’ve finally taken that leap, written an offer that was accepted by the seller, you’re still in the buying mode. While waiting for loan funding, you may decide it’s a good idea to buy a new car to match that new home. Better yet, you may as well buy new living room furniture; oh, and a big screen TV would fit on the wall over the fireplace like a glove. In fact, there’s a sale on washer and dryers, and you’ve always wanted a new fangled front loader.
Your excellent credit report affords you the opportunity to buy whatever you desire and, besides, there are no payments due for a year. It’s like getting a new car and home furnishings for free. After all, more debt shouldn’t affect the funding of a mortgage.
Wrong! New purchases can dramatically affect the amount of money you can borrow on your mortgage. Don’t make any major purchases after decided to buy a house. If you see a new living room set you just have to have, put it on law away until after closing.
10. Plunging Into Debt After Closing
Now that you’re a homeowner, you’re blown away by all the incentives arriving in the mail offering great deals on a home equity loan. Why, you can pull out all your equity and use this new-found money to buy all those necessities you’ve been denying yourself and your family. A vacation in Hawaii next December sounds wonderful to you. So does buying patio furniture, and maybe new decking or a spa for the back yard.
While you’re at it, maybe you should remodel the kitchen, too, and put in granite counters, perhaps new appliances. You can afford it. You will never lose your job or need money for a medical emergency; times are good right now!
It is easy to go hog wild making your new home ‘yours’ with new furniture, decorating, but remember, it doesn’t all have to be done at once. Make a budget and stick to it. You’ll be much happier in the long run.
Looking for a Realtor that will guide you through the home buying process and help you make good buying decisions? Give us a call at 972-562-0896. We’ll show you all your options so you can make good decisions.
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Tags: avoid foreclosure, dallas home buyers
This entry was posted on Tuesday, August 12th, 2008 at 6:02 pm and is filed under Foreclosure, Home Buyer, Real Estate, Tips for Buyers. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.