Let’s agree, buying a home can be emotional, unnerving and bewilderingly complex; avoiding the most expensive first time home buyer mistakes will make it less so. Here you’ll find the five most expensive mistakes Austin first time home buyers make and some tips for how to avoid making them in your home search.
Mistake #1: Getting Pre-Qualified
Undoubtedly the biggest mistake Austin home buyers make is not understanding the difference between a pre-qualification and a genuine, pre-approved loan commitment. Far too many would-be home buyers still believe that an informal opinion from a loan agent is the same as a loan commitment. Many times they discover the unfortunate truth that they can’t buy anything. Why? Simply because the buyer confused being pre-qualified with having a genuine loan commitment.
When you are pre-qualified, the lender is making an educated guess about how much you can borrow based on information you’ve provided without verification, substantiation or research . When you have a genuine loan commitment, the lender has verified and substantiated all of the representations you’ve provided and is offering to lend you up to a given amount at a given interest rate with certain terms and under specific conditions. Keep in mind a loan commitment is subject to a property appraisal that is satisfactory to the lender, good title, a possible last-minute credit check and possibly other verifications.
How to Avoid Mistake #1: Always seek out a formal loan commitment and inquire what additional steps the lender will require once a home is found to finalize the loan.
Mistake #2: Making “Low Ball” Offers
An unusually high number of home buyers – usually first-time home buyers – still make ridiculously low offers on homes, even in a multiple offer situation. These seemingly misguided and misinformed group strangely believe that Austin’s housing market resembles 2008. Often a well-meaning friend or relative, unaware of Austin’s huge housing demand and short supply, is trying to help. Reality is that low ball offers are a waste of everyone’s time especially when the competition is keen for a limited supply of homes. It’s normal for home buyers to share their goals and aspirations with friends, relatives and business associates, but they are invariably not “up-to-speed” about the Austin real estate market and the fierce competition between home buyers that we are currently experiencing. Rely on your Buyer’s Agent and Mortgage Broker to guide you through the home buying process with their knowledge and experience as it relates to purchase rules, appraisals, market values, and other details that are not readily available to your friends or family. Buyer’s Agents will help you interpret the market in the neighborhood you’re considering and advise you on the best way to approach offers. Check out our previous post about a Buyer’s Agent’s incentive to negotiating the lowest price.
How to Avoid Mistake #2: Have your buyer’s agent explain the real estate market in the neighborhood you’re looking, review market data and make market appropriate offers.
Mistake #3: Using the Builder’s On-Site Agent when Buying New Construction
People looking for new construction frequently forego having their own buyer’s agent. And why not? The Builder’s Sales Agent is so charming and accommodating, surely she is going to help me get the best deal possible right? Wrong! The Sales Agent works for the builder and will always work in the builder’s best interest, not the Buyer’s. They are not being mean or hateful, it’s what they have been hired to do, sell the product for the most money in the shortest time. They will not advise you whether or not any premiums paid for lots and options will be recovered should you have to sell the property or negotiate any discounts.
Furthermore, in most new home communities, the builder’s agent is prohibited from showing a buyer any pre-owned homes in the community, even if that home matches everything the buyer wants and is a better deal. So, how is this good for the Buyer? It isn’t. It’s only good for the builder. Don’t make this mistake thinking you’ll save the buyers agent’s commission, which is paid by the builder and included in the purchase price of the home you select.
How to Avoid Mistake #3: Always hire a buyer’s agent represent you, especially if you want to purchase new construction.
Mistake #4: Sharing Confidential Information with the Seller’s Agent
This unwitting mistake can cost you thousands of dollars. Typically, it happens when the buyer tells the seller’s agent the amount of the buyer’s loan approval, thereby divulging the buyer’s financial upside. The buyer’s impulsive sharing of what should remain private and confidential information has undermined the buyer’s bargaining position. The seller now knows the buyer’s true financial capability. Why? Because the seller’s agent is legally obligated to disclose that information to the seller. Never divulge any financial information to anyone other than your own buyer’s agent or your mortgage broker. A good buyer’s agent will request a new pre-approval from your mortgage broker for the amount of each offer you make, so you’ll never show the seller you can afford more.
How to Avoid Mistake #4: Never divulge any financial information to anyone other than your own buyer’s agent or your mortgage broker.
Mistake #5: Not Being Proactive in Your Home Search
When the housing market is hot – like Austin today – and competition is fierce, a buyer must move quickly, act fast and be prepared to make a “go – no go” decision before the other guy. The old adage “he who hesitates is lost” applies to home buying in a hot market. Homes and small rental properties are moving quickly “off-the-shelves” in Austin. Inventory is lean and qualified home buyers are plentiful. The average shelf-life of a home listed in the Austin Multiple Listing Service is about 2 months. In statistical terms that is by definition a “seller’s market.” Multiple offers are common, over-bidding is likely when more than two buyers are competing for the same house. There is an urgency to the Austin housing market that you must respect if you expect to be the “winning” offer.
How to Avoid Mistake #5: Make home buying a priority, be willing to see homes soon after they’re listed and have a clear sense of what you’re looking for so you can make a decision to make an offer or wait for another, more appealing, home.
Don’t Want to Make Any Mistakes When You Buy a Home in Austin?
Hire an experienced buyer’s agent who can help you navigate the process. Find someone you trust to explain the real estate market and not just spend your money for no reason. We have a combined 60+ years of experience with over $200MM sold. We know how to coach clients and get buyers the best deals, even in a strong market such as Austin. Check out more about our program at Austin Home Buyer Representation. Then, call us at (512) 827-8323 or email us at info@11OaksRealty.com to schedule a no obligation consultation.