Common Mistakes People Make When Buying Real Estate
- Failing to get pre-qualified or pre-approved for a loan before starting to look at properties
- Failing to contact several lenders to compare loan rates, terms, and conditions
- Believing that they must contact the Listing Agent in order to see a listed property
- Failing to talk to several real estate agents or REALTORS® before signing a Buyer's Representative Agreement or purchasing real estate
- Failing to realize that the Seller pays the real estate commissions (for all properties listed in the Multiple Listing System)
- Believing that they can save half of the commission if they represent themselves
- Buying a house that is For Sale by Owner without consulting or being represented by a REALTOR®
- Not looking at several properties before purchasing a home or property, including properties that are slightly more and less expensive than what you can actually afford
- Buying a home without having a thorough home inspection done by a licensed home inspector
- Thinking that there is no difference between a real estate agent and a REALTOR®
- Not working with a REALTOR® when buying every type of property!!!
Now, let's expand on these issues one at a time.
But, before we get started, everyone needs to understand this – the material presented here is simply Gary's thoughts with regard to the mistakes buyers make, and it is not all-inclusive.
They are just mistakes that Gary has seen buyers make when purchasing real estate.
So, with the disclaimer out of the way, let's get down to business.
First, let's take a look at Failing to get pre-qualified or pre-approved for a loan before starting to look at properties.
The difference between being pre-qualified and pre-approved is actually pretty simple.
When a buyer is pre-qualified, they have contacted a lender and given them basic information that allows the lender to give them an estimate of how much they will qualify for when they are ready to buy property.
When a buyer is pre-approved, they have undergone the steps necessary to actually be approved for a specific loan amount.
Obviously, being pre-approved is better because you have already been approved for the loan.
So, the primary reason it is a mistake not getting pre-qualified or pre-approved for a loan is because the buyer(s) risk finding the perfect home, only to find that they don't qualify for the loan needed to purchase that specific property.
It is very discouraging for everyone when this happens, and it can permanently taint the home-buying process for the buyers.
By taking the time to consult at least a couple of lenders before starting to look at properties, buyers ensure that they can actually afford the homes or properties that they are being shown.
REALTORS® and real estate agents can search available properties by price, size, location, condition, and many other specific criteria.
So, if a buyer is pre-qualified or pre-approved for a specific amount, and they inform their REALTOR® how much they qualified for, they can be more confident in their ability to afford the properties that they are viewing.
Next, let's briefly look at Failing to contact several lenders to compare loan rates, terms, and conditions.
While every lender can loan you money, the interest rates, terms, and conditions can vary dramatically.
So, buyers need to contact several lenders in order to get the best possible deal when purchasing property.
Also, different lenders offer different programs for first-time homebuyers and other groups.
Therefore, it is definitely beneficial to the vast majority of buyers to contact multiple lenders before buying property.
The next mistake a lot of buyers make is Believing that they must contact the Listing Agent in order to see a listed property.
The simple truth is that buyers can use the agent or REALTOR® of their choice.
As a matter of fact, Gary believes that buyers are normally better off having an agent or REALTOR® who only represents them and their interests.
In Tennessee, an agent or REALTOR® can represent one party, both parties, or neither party in a real estate transaction.
With this in mind, Gary's advice to buyers (and sellers) is to find an agent or REALTOR® who they are comfortable with, and who only represents them and their interests!
Gary believes this provides the buyer(s) and seller(s) with the best opportunity for success in the overall transaction.
Failing to talk to several real estate agents or REALTORS® before signing a Buyer's Representative Agreement or purchasing real estate is the next mistake a lot of buyers make.
This mistake is related to the previous item.
However, there are some other considerations.
Real estate agents and REALTORS® are no different than any other professional.
They come in all shapes, sizes, and have different life experiences, expectations, and qualifications.
With that in mind, buyers should only work with an agent or REALTOR® that they feel comfortable with and trust.
Too many buyers simply contact one agent or REALTOR® and suffer through the process when they don't actually like, respect, or trust that individual.
Every buyer needs to realize that they can work with any agent or REALTOR®.
So, Gary strongly recommends that you interview agents and/or REALTORS® until you find one that YOU like and trust.
The next mistake a lot of buyers make is Failing to realize that the Seller pays the real estate commissions (for all properties listed in the Multiple Listing System).
Many buyers think that they are going to have to pay substantial commissions in order to be represented by an agent or REALTOR® when buying properties.
In fact, the seller normally pays the commissions for himself and the buyer(s).
This is true for all properties listed in the multiple listing system.
And, a seller who is selling his or her own home may also be willing to pay a commission to a buyer's agent.
However, this normally must be arranged in advance.
It is best to let your agent or REALTOR® contact the seller to find out if they are willing to pay a commission before starting any other negotiations.
At a minimum, the seller may be willing to pay part of the commission for your real estate agent or REALTOR®.
Given the significant cost of most real estate transactions, Gary strongly recommends that you get a real estate agent or REALTOR® to protect your interests when purchasing any type of real estate!!
Buyers who believe that they can save half of the commission if they represent themselves is another common mistake that many prospective buyers often make.
In Tennessee, you cannot be paid a commission from a real estate transaction unless you hold a real estate agent license.
So, buyers cannot be paid a commission from the sale if they don't have a real estate license.
So, they do not “save” money by representing themselves.
Also, sellers agree to pay a specific commission when they list their property, and that is the amount they will pay regardless of whether or not the buyer is represented by an agent or REALTOR®, or represents themselves.
So, buyers who seek to save money by representing themselves do not actually save anything unless they are licensed real estate agents.
In fact, they may end up losing money by not understanding the process and laws that are applicable.
And then we have the mistake of buying a house that is For Sale by Owner without consulting or being represented by a REALTOR®.
Again, buying real estate is the largest investment most people make, and because of that fact it should not be taken lightly.
While there are many people who are perfectly capable of representing themselves in a real estate transaction, there are a lot of people who do not have the time or expertise necessary to effectively represent themselves.
It is important to remember that price is only one aspect of the total deal.
Buyers who hire a real estate agent or REALTOR® may actually end up saving money through the other aspects of the overall real estate contract.
At a minimum, buyers should at least consult with an agent that they trust before signing a contract to purchase property.
Not looking at several properties before purchasing a home or property, including properties that are slightly more expensive than what you can actually afford is another mistake often made by buyers.
Many times, buyers “jump on” the first property that they see.
This is sometimes because they truly like it, and other times it's due to “fear that they'll lose it” if they don't make an offer on it right away.
And, for “hot markets”, that is certainly a consideration.
However, for most markets, you won't normally lose the property if you take the time to look at other properties.
As a matter of fact, it can improve a buyer's bargaining position by helping them better understand what is available and the value of various amenities and extras that are available.
Buyers should also look at properties that are slightly out of their price range because sellers often are willing to take less than the advertised price.
So, as a rule of thumb, buyers should look at properties that are priced between 10-20 percent higher than what they expect to pay for a home or property.
Gary also recommends looking at properties that are priced 10-20 percent below what you are approved for because there may be some great deals on good properties in your area.
Even if you find that the lower priced properties are not up to the standards you expect, it will help you know when you've found “The One”!
Next, let's take a quick look at another common mistake that too many buyers make -- Buying a home without having a thorough home inspection done by a licensed home inspector.
This is a common mistake that buyers (especially first-time homebuyers) often make, and it is normally made as a result of trying to save money.
Unfortunately, this is not a good way for buyers to save money.
As a matter of fact, a thorough home inspection performed by a qualified, licensed home inspector will normally save buyers money!
This is true because a good home inspector can find things that need to be addressed, and those items could cost far more to repair or replace than what the inspector charges to do the inspection.
Gary always recommends that homebuyers hire a licensed home inspector to check every home before actually buying it.
You can make the purchase contingent upon a successful home inspection (and you normally should make this contingency a part of your offer).
However, one word of caution – buyers need to understand that problems with cosmetic items ARE NOT suitable grounds to cancel a contract!!
So, you will need to make sure any cosmetic issues are addressed in your original offer.
While it is not uncommon for buyers and sellers to disagree about who should pay to fix cosmetic items, the differences can normally be worked out if all parties are willing to be fair and reasonable.
Thinking that there is no difference between a real estate agent and a REALTOR® is another common mistake because most people do not realize that all REALTORS® are real estate agents, but not all real estate agents are REALTORS®.
To many, this may seem like a trivial issue.
However, in reality, it can be a big deal because REALTORS® are members of the National Association of REALTORS®, and they voluntarily agree to abide by a higher code of ethics and standards of practice than ordinary real estate agents.
Now, that is not to say that you will receive a lesser degree of service if you choose to work with a real estate agent – you may not (remember – all REALTORS® are real estate agents, so REALTORS® certainly do not dislike real estate agents!).
However, why settle for less than the best? As stated before, REALTORS® voluntarily agree to abide by a higher ethical and performance standard than required by most states' laws.
So, your chances of receiving outstanding service is improved when you work with a REALTOR®!
Obviously, Gary recommends that all buyers and sellers select the REALTOR® of their choice to help them with their real estate endeavors!
Finally, let's take a quick look at another mistake many buyers make -- Not working with a REALTOR® when buying every type of property!!!
Whether you're looking for land, commercial, residential, or multi-family property, you will improve your chances of finding the property that you really want when you work with a REALTOR®.
As stated above, REALTORS® are professionals who take great pride in the level of service they provide to their clients.
So, it stands to reason that a REALTOR® will work hard to help buyers find the property that meets their needs.
Find a REALTOR® you like and trust, and listen to their advice!!!
Contact Information:
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Phone: (423) 895-6084
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Shell & Associates Real Estate
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Office:(423) 543-2393
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308 West G Street, Suite A
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Fax: (423) 543-2135
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Elizabethton, TN 37643
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Email: gary.smith@tnrealtyagent.com
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