When we bought our first house, we thought that we were ready. We had ‘seen’ tons of purchases and closings on HGTV, had gotten the run down from our realtor, read the stories online really thought that we understood all aspects of home buying at least enough to be good buyers.
But man, we were wrong. We fell into a lot of the first time home buyers and just home buyers in general mistakes from underestimating to cost of repairs. Luckily for us, it all turned out okay, but knowing the pitfalls ahead of time would have been great to avoid them altogether. So here goes:
Number one: Thinking you are Chip and Joanna Gaines
If you know that you don’t have the tools or the skills to remake an entire house and don’t have funds readily available to renovate while you live elsewhere, then don’t buy a house that needs a full $100000 gut job. Making this mistake can run the gambit from biting off way more than you can chew and ending up in a money pit, or spending your first two years in a construction zone. Either way, be honest about your skills, effort, and money you are willing to put into a property. Sweat equity is good, sweating when you can live in the house is not.
My own mess up: I wanted a house that I could force equity into by buying low and renovating. The only problem is I didn’t have the skills, and when I started touring the houses and saw mold, structural damage, full house 80k gut job renovations, I started realizing that my idea of a fixer upper was more cosmetic. Like flooring, paint, and maybe a bathroom renovation or 2. Luckily my husband had a smarter head and insisted on a paint only house. We ended up happily buying in the middle.
Number Two: Underestimating the cost of repairs
The offer we palce on a house is based on the market value (given comparable sales) minus the cost of repairs needed. When you are walking the house and looking at broken items that will need to be fixed, if you underestimate the cost of repairs then you’ll offer the wrong amount. Yes, home depot might be selling flooring for $1.50 a sqft but is that the carpet you want in your home? And does that include the installation? You might find that you should have offered $5000 less on the house if you had known that the flooring would cost $8000 instead of the $2000 you initially thought. Take some time to walk Home Depot and Lowes and look for real prices of fixtures, flooring, cabinets, etc. that you would buy. Not only is it fun, but it provides excellent knowledge. So walking through a home, you have an estimation of the cost of the items needing replacing or fixing. It’s ok if a house needs some work, but you don’t want to get a surprise on the bill when you go to do it. You know your style and how you’d like your home to look, do your homework on the actual cost of making your vision a reality.
My own mess up: When we walked through our home it looked like an ax-murder had taken place on the teal green carpet. Our realtor estimated 2000 to replace the carpet, and we made a mental note that it wouldn’t be bad to replace it all. That wasn’t a bad estimate, except it was for the lowest grade carpet. The actual cost – with family discount- was closer to 4500 since we ended up picking a premium carpet. That would have been great to know while we were writing the offer.
Number Three: Falling in love with the house and ignoring all the problems/price
Before you start envisioning yourself sipping tea on the back patio, make sure that the home doesn’t have any problems you are overlooking. It’s easy to walk into a house, notice all the nice finishes and miss that huge big 15′ cliff in the backyard, or that the house is leaning at a 15% grade to one side. And on that note, you never see all the details in a home when you look the first time. For one reason, you aren’t in the home that long, and you are trying to look at as many things as you can so you are bound to miss things. Try to look at the house different times of the day and if possible, during different types of weather.
My own mess up: We looked at a house that was the perfect price, the perfect size and the perfect layout, only one problem. It had the water run off from the street running openly through the backyard. And on heavy rain days (like the day we visited) the water was so heavy it flooded the backyard. We tried to convince ourselves it would be okay but in the end realized that our kids would probably drink the water and climb into the sewer drain. We had to walk away.
Number Four: Borrowing the maximum amount the bank is willing to lend you
Just because the bank approved you $1 million, it doesn’t mean that you should borrow that amount. Banks will always be more than happy to charge you more money than you should because they get more money. And even though they work the numbers to ‘show you’ you can afford more, you know your situation, and the numbers that aren’t on paper like the $500 you give your parents every month or what you feel most comfortable paying each month.
My own mess up: Our banker kept telling us we could borrow $10,000 more because it was only a few dollars more each month on our payment. In the end, we stuck to our guns and borrowed $40,000 less than she was encouraging us to. And I am so glad we did.
Number Five: Negotiating against yourself
Sometimes we get so scared of what we think the sellers will think, or that we don’t want to offend the sellers that we negotiate against ourselves and give higher prices than we should. We don’t think the seller will come down because of ____ fill in the blank reason so we don’t ask. Remember that the seller is in it to make money and sell the house. If you ‘offend’ them in the beginning and make an offer they ignore, then offer again at a higher price if you really want the house. Trust me, if your price is close to, or what they are looking for they will take it even if you ‘offended’ than initially. In a hot market, this can carry some risk especially if properties are frequently going into multiple bids situations. I’m not telling you to lowball, but be fair and offer what you will work for you.
Don’t fall for it
There are so many areas of home buying that you could buy a hundred houses and never encounter the same issues. But as first time home buyers, these are the common ones that can turn an average expected purchase into a serious money pit you regret buying.
But now that you know what are some pitfalls to avoid. You can shop for a house with a little less fear than you did before.
You don’t have to be scared. You don’t have to be worried about your purchase bankrupting you.
You can buy a home with confidence knowing that you are aware and can mititgate these common esxpensive mistakes.