Deadly Home Buyer Mistakes To Avoid
Did you know that buying a house will be one of the most expensive transactions you will have and at the same time, it will be one of the most challenging, and to a lot of them, a more terrifying experience? So it’s a good idea to know what to expect when you are buying a house, whether you are a first-time buyer or if you’re buying your house second or third time. Because every time you buy, the transactions change, the processes change and the locations change. So it’s best to know as much as you can prior to buying your home. I’ve been doing business for over 25 years and I’m going to give you up to 17 mistakes to avoid or to be aware of, and hopefully one or two or three of them that applies to you. You won’t make them when you buy your dream home or your biggest transactions of your lifetime. By the way, while you’re on this channel, please subscribe as I put out these videos every week with lots of updates and market trends happening in the current real estate market.
The number one mistake I see buyers doing over and over again is stretching to buy the home as much as they can. So if you are qualified for 700 or 725, stick to those numbers. I have a buyer right now who’s qualified for $900,000 and he’s stretching to buy up to 950 to 975 because his taste is very high and most of the buyer’s taste are higher than what they can afford. So always buy within your limits. I’ll give an example. If you buy a $500,000 house and you are putting 5% down, your payment will be $3,000. So if you buy more than that, your payment will be higher and you may not qualify. And you may qualify, but then you will stretch it over the next 2030 years. So buy your house within your comfort limits. No point stretching and struggling and paying high mortgage rents for the next 30 years. So be comfortable buying your house. It’s tough enough to pay mortgage payments. Let loan higher than what you expected, so stay within your budget. That’s the number one mistake that most buyers make that I’ve seen and other agents have seen.
The second mistake that the buyers make is they get qualified by a lender and they feel like, oh, I can buy an $800,000 house. And when they go buy to purchase, they realize they cannot qualify for $800,000. So the difference is you have to get approved to buy a house. And what’s the difference between qualifying and getting approved? Well, when you are approved, the lender has checked your tax statements, has pulled your credit, has looked at your debt payments. You might have student loans, car loans, credit card loans, medical loans. So being approved is they match your income. Let’s say if you’re married and you make $100,000 and based on your expenses, car payments, student loans, any other debts, the lender will tell you how much you can afford to buy based on your debt to income ratio. So get approved and again, going to back. Number one reason, or number one mistake you make is that first stick to your purchase price. And number two, stick to your approved amount. So if the lender says keep your payments under 3000 a month, stick to that and don’t stretch to 3200 a month,3300 a month, and stretch it for the next 30 years. Buying a house is tough as it is. Don’t stretch to pay that extra 200 $300 because you added a pool in the house, or you got a bigger house than you could afford, or you got a better location. So buy within your means.
The third mistake people make is when they are thinking of buying a house, they do not check their credit. So before you even talk to a lender, or before even thinking about buying a house, or when you think about buying a house, at the beginning level, check your credit. Go to Experian or TransUnion or there are a lot of free credit companies that check your credit score. So check your score. It has to be on average at least 620 or more because that’s the minimum required. Of course there’s variations. If for some reason your credit score is not that great, give yourself three, four, five months, repair the credit, bring it higher, maybe 700 and 727.50 because the better the credit score, the better the interest rate you may get. So by improving your credit score, you improve your interest rate and thereby reduce your expenses. There are also credit card repair companies, so google them in your area or direct message me and I will refer you to credit repair companies that will help you get your credit score up within 30 to 45 days, or up to within 90 days, depending on how bad your credit score is.
The fourth mistake to avoid is to make sure that once you’re in escrow, one of the first things you do is conduct a thorough home inspection. And we recommend that that you use a home inspection company. Don’t call Uncle Bob or your handyman friend or somebody to do the inspection because the way the inspectors do the inspection, they’re licensed and they know what they’re doing. I’ll give an example. I just had an inspection done on a buyer sale I had last month. When the inspector came in, we went in the bathroom because we checked every rooms and as soon as we went to the bathroom he pulled out a gadget, pointed it to the wall behind the sink and immediately he told me “Oh, there’s moisture behind the wall”. He detected moisture with a laser device or some kind of sensor and we found out, because we asked the seller to fix it, that the shower pipes behind were dripping and that could have created mold after two or three years as the moisture got more and more inside. But that was avoided by a simple test using a home inspection company. So we highly recommend that if you’re in escrow use a home inspection company, it costs $500 to $800. It’s well worth the money spent.
The fifth mistake that buyers make or to avoid is that when you buy a house, ask your agent to tell the seller or work with the seller to have them pay a one-year home warranty. They pay a home warranty cost anywhere from $500 to $800. Could be more if you have a swimming pool and jacuzzi and other items. But in general, they cost $500 to $800, you can make the seller pay for it. So what happens is after you move into the house and let’s say you move in after a couple of days of moving and restoring and painting and you try to use the dishwasher and if it ends up not working for whatever reason, you can call this home warranty company. They’ll come and fix it and you only have to pay the usually it’s $75 deductible charge and it’s fixed. So we highly recommend that. And then every year after that you have the option to renew the home warranty or not renew. So I recommend that you keep it at least for the first two or three years because by that time you’ve either fixed some things or you’ve come across things that are not going to work and it’s been taken care of. So home warranties are very important to get and we highly recommend that you get those.
The 6th mistake to avoid is while you’re in escrow and when you write the offer, you may overlook these kinds of things. So let’s say you buy a house that was very well decorated and there were some nice pictures and nice drapes and maybe a chandelier that goes with the house. Now what happens is you possibly think that everything goes with it, but make sure with your agent or and with the seller to exactly know what is going to go with the house. If they are going to not going to leave the chandelier, they have to put that in writing. Or if they did put it in writing that I’m going to take the chandelier and the picture on the wall that matches the whole decor and the floor plan. You may want to ask the seller nicely that “Hey, this looks really good with the paint, we have similar furniture so could you leave it so that you don’t have to change things around” and they may leave it. You may want the refrigerator that matches the appliances, and usually they don’t leave that, but you could ask the seller to leave that for you or negotiate a bargain price. And you could do that, and the seller may give you that refrigerator for free or give it to you at a mass discount. Because what if you move in and then don’t find a similar refrigerator that matches the colors or the brand of the other appliances, like stoves and the dishwasher and the microwave? So always a good idea to look at thoroughly detail what the house offers and what you may want to keep despite the fact that it belongs to the seller. Sometimes they are willing to negotiate with you and sellers are nice people in general and they may want to have you enjoy the decor that they enjoyed that they may not be able to use it at their second house.
Mistake number seven to avoid is to get a second opinion when you get insurance. When you buy a house lenders require to get fire insurance. So when you are getting insurance lenders recommend you insurance company or agents may recommend you an insurance company but we also recommend that you get a second and third quote on your own. If you are with State Farm or AAA or Farmers Insurance you may want to get a quote from them because you could get a bundle price. So even if you can save $20, $30, $40, $50 a month in insurance money it’s worth it because you’re stretching to buy the house as it is so that $50 a month can go a long way. So we always recommend getting two or three quotes and get the best insurance, not only the best insurance but the best deductible that you can get because the higher the deductible, the lower the premium so you can adjust it. So talk to your insurance company and get the best quote that you can get.
Mistake number eight is to make sure or to check if there is septic tank in the house or if there is a septic tank and not a public sewer system. Of course, this doesn’t apply to people in the metro areas in the cities but it may apply to other people in the rural areas. In fact, we bought a house in the desert two years ago for an Airbnb while we were in Escrow, and the good thing is I was an agent, I was going to the paperwork and I found out that the neighbors had septic tank. So I got curious and called the seller’s agent to ask him to see if there’s a septic tank. And he said yes there is. He did not disclose that to us. So I found out there was a septic tank, and then I found out the requirement that when you transfer title, there has to be a septic tank certification. So we made the seller pump the septic tank because it was almost full, it was not done for two or three years. So we had him pump the septic tank and gave us a certification of the septic tank, that it was working properly, et cetera. So do check for things like that with your agent or with the seller.
Mistake number nine to avoid is to make sure that you have an appraisal done. If you’re a cash buyer, even then we recommend an appraisal done. And if you’re getting a loan, lenders require that anyways. They cost anywhere from five hundred dollars to one thousand dollars, depending on the size of the house. So getting an appraisal not only gets you a value of your home, if the appraised value is lower than the purchase price, let’s say you bought a house for 450 and the appraisal came in at 440, you may have to negotiate with the seller to reduce the price, and maybe they will reduce it to 440. The other option is if it doesn’t come up to the appraisal, then you can get a second appraisal or just pay the difference. Of course, in this hot, hot market, a lot of the sellers will not reduce the price, so you may have to come up with the extra $10,000 to make up for the appraised value on the loan. And if you’re a cash buyer, at least you know if you’re paying a million dollars for a home, if the house is worth a million dollars or not. And it’s not just worth 950 or so. So we recommend appraisals done all the time.
The 10th mistake to avoid is to make sure that when you get a title insurance, when you transfer title, check your title for any liens, any encumbrances. Of course, the title company is supposed to do that, but we recommend that you go through it with your listing agent, with the title officer, and make sure that when you change title, there are no liens or no encumbrances. So that’s a good one to check. And also make sure to use a national title company rather than some of these small title companies, because there is a difference on how much they charge and how much they cover. So this is a very sensitive topic. So talk to your listing agent or your buyer’s agent and get as much detail as possible as far as how much title policies to get and what title companies to use.
Mistake number eleven to avoid is that if you’re stretching to buy a house and you are pretty much short on your closing cost, then sometimes you can ask the sellers to pay your closing cost because the closing cost is in addition to your down payment. So if you’re buying a house for $500,000 and you’re putting a 5% down, you need $25,000 plus closing costs, which could be anywhere from $10,000 to $20,000 additional, depending on where you are, how much your prepaid taxes are, how much your prepaid insurance are, your moving costs. So all those add up. So you may want to have $40,000 instead of $25,000. So if you’re running short, you could ask the seller to pay for $5,000 in closing costs, et cetera, to help you avoid not end up buying the house. And of course this is a hot market, so they don’t. But depending on your area, where you are, where your locations are, and depending on how desperate the seller is to sell your home, they may be willing to give you closing costs. So it never hurts to ask the seller to pay for closing costs, whether it’s $2,000 or $10,000, depending on the purchase price of your house.
Mistake number twelve is to go through your HOA, rules and regulations and these restrictions. Lot of homes these days, especially town homes and condominiums, mobile homes and even regular homes, single family homes, have association. So if they have HOA, check the Ccnrs. These are the rules and regulations. I’ll give you a simple thing. If you own a pet, and today more than 70% of the homes have a pet, so let’s say you have a large dog, a Doberman, that is pretty big size. Some of the association have restrictions on how tall they can be, so once you move in, they may have you get rid of that dog because it’s oversized. In my community where I live, two years ago, one of the neighbors rented their house to a plumber and the plumber had a truck, it’s a regular truck, the plumbing truck. It had signs on it saying “I’m a plumber” and the name of the plumbing company. And he could not park in the driveway, so he had to park on the streets for some reason because they had three or four cars. So even though he parked in the driveway, the association asked them to move the truck or park it inside the garage, but he could not park inside the garage because it was too tall to go inside. The rules and regulations say that you cannot park a commercial vehicle in your driveway or on the streets. So the tenant actually had to move out and break the lease because of the rules and regulations of that HOA, which is my HOA. I didn’t know that myself, but now I know. So check your rules and regulations. They have restrictions on what color paint you can use, how much of a house you can build, whether you can build another shed behind your house or build an ADU which is an Accessory Dwellers Unit. These days, a lot of people are building those. If you have some plans to do something when you move in, which most of you have, check with the HOA if you have it, to make sure you are going to be able to do that, so that you are able to do it once you move in. If you wanted to paint the color pink and now you cannot do it, you may get upset not being able to do that. So always check thoroughly your Ccnrs. Hire an attorney or an expert to explain to you in layman’s terms what all those restrictions are.
Number 13 mistake to avoid is to check sure. And of course, it does not apply to everybody. If your house has mineral rights, most of them may have mineral rights to make sure that when the seller sells you the home that the mineral rights are transferred to you. Because what happens if you’re in a certain area where there’s oil or other minerals, they discover oil or minerals underneath your house, then you should get the rights to it and not the seller. So that’s one of the things that people overlook.
But one thing you should check when you buy your house, we are on mistake number 14 to avoid. And that has to do with the flood zoning and the fire zoning within California. So in California, at least in Orange County, when a seller sells their home, they have to disclose by law to let the buyers know if the house that the seller is selling to you is in a flood zone or a hazard zone or an earthquake zone or a fire zone. And if it is in that flood zone or a fire zone, doesn’t mean you don’t have to buy it. That just means that your insurance are going to be higher. So the other states, you may not have those mandatory disclosures. So if they are not there, ask the seller for these zones so you know what kind of zone it is and then you can decide, hey, what if there’s a major flood in 30, 40 years and you’re going to be staying there for 30, 40 years? You may not want to buy that house. At least you are aware or at least you can get extra insurance for the flood zone or the fire zone or the earthquake zone, et cetera. So check with your local county, local city, local state, to see what kind of requirements are there when the house is transferred.
Mistake number 15. I won’t drill on it too much, but sometimes when you buy a house and if you have kids or going to adopt kids or going to have kids in the future, you may want to check the local sex offender laws because they may be out there, some sex offenders. So, in California, it’s also a required disclosure. So in other states, if there’s not a required disclosure, ask your agent to find out if there are any sex offenders living in the neighborhood that you’re moving into.
The 16th mistake to avoid is not asking proper questions to your agent, to your buyer’s agent. Remember, you’ve hired this agent. The buyer’s agent does not cost you anything. Their commission is paid by the seller’s side, not your side. But you have all the right to ask the seller important questions that you may not be aware of. You may ask him, how are the schools over there? How is the traffic in Orange County? A lot of people live in Anaheim Hills, and if they work downtown LA, it’s going to take them at least an hour to get to LA. So if you’re new in the area, ask them questions. How is the traffic? How are the restaurants? Are there shopping centers? Are there hospitals? If you don’t know that, your agent may get you that information. Of course, today there’s Google and all the other information, but you can’t rely on that. So if you want specific information about specific schools or some other information about zoning in that area, or what kind of private schools are out there, or any question you have, ask your Realtor. If they don’t have the information, they will get it for you. At least the good agents will get them for you. You are hiring an agent. He’s going to make money by selling your house, so he’s excited to help you. That’s their job. Ask your realtor question, as many as you have, of course, reasonable questions, because a lot of the things you can do online today. But anything else, feel free to ask them and make sure you’re satisfied with the answers. If he or she the agent cannot get you the answers, they will get you the resources for you to get the answers. So work with a great agent. And I belong to a national network of top agents. So if you’re not in Anaheim Hills, California, or if you’re not in Orange County, I’ll be glad to refer you. So feel free to contact me.
And the mistake number 17. The last mistake I’m going to talk about is to buy below your means. I mentioned briefly in one of the other points that you should buy below your means. So get approved just below what you can afford. Don’t stretch it at the same time you want to have money left over. So if you have a $25,000 down payment and you’re buying a house at $500,000, at 5% down, you need $25,000.But you may need additional $15,000 to $20,000 to move into the house. Because on top of the down payment of $25,000, you’re going to have prepaid cost like insurance and tax and closing cost as well. Escrow title, document fees, origination fees. So that in itself can range from anywhere from $10,000 to $20,000 additional on top of your $25,000.But I’ve sold many, many homes, and a lot of the buyers don’t think about the moving cost. So, yes, let’s say you paid $35,000 to close the escrow, your down payment and closing costs and prepaid cost. Now you’re moving. You may end up buying extra furniture, extra appliances. You may have to buy come and fix a little bathroom or buy an appliance that’s not working properly. So always keep 4 or $5,000 extra for unexpected expenses. But we also recommend that you have two or three or four months of extra reserve for your monthly living. What will happen after six months? You buy the house and one of you, if you’re a couple or two people working together and one of them loses a job, do you have extra funds? So we recommend that you have extra funds, what we call emergency funds, not only for moving expenses and other unexpected homes when you move in, but also if something happens, if you get sick or one of your spouses cannot work for five months. Do you have the extra four or five months of payments so that you don’t stop making payments that will ruin your scores, credit scores, or even lose the house?
So buy below your means, but buy as much as you can, but buy below the means. We always want a car. We always want a Mercedes, but our budget is a Honda. Same thing with a house. We want a house with a nice view, a nice yard, moving condition. But our budget is a home with a regular home. And it’s okay to buy a regular home. The key thing is get into a house and after three or four or five years, buy your dream home, do your move-up home, and then keep moving up and up as you grow, financially and otherwise. So good luck.