May 21, 2024

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Itching to Buy a House? Don’t Forget These Precautions

Buyer Pitfalls as Early as Possible

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How hot is the seller’s market in the United States? According to the May 2021 data by the National Association of Realtors (NAR), a previously owned home in the country already costs at least $350,000—the first time it has ever hit this amount.

Other reports suggest that homebuyers are willing to pay about $60,000 on top of the published home price just to get ahead of their competitors. Because competition is intense, many, unfortunately, forget about the basics of house hunting and buying safely.

Granted, owning a house has always been what you dreamed of for some time now. However, this plan can immediately turn into a nightmare if you’re not careful. You’ll still end up spending thousands or even millions. But this could come straight out of your pocket if you overlook the precautions you need to take.

Thus, even if you’re itching to get the house now, don’t forget to do the following:

1. Participate in Open Houses

Just because the home feels perfect on the listing doesn’t mean it is truly what you’re looking for. The best way to gauge a house is to see it for yourself.

Participate in open houses, and don’t pay attention only to the staging. Look beyond it: check the quality of the floor, the condition of the paint and the ceiling, the cleanliness of the area, the humidity of the basement, and the smell of the rooms.

Check the neighborhood. Does it look safe? Is it quiet? How accessible is the place from public amenities, including schools, supermarkets, or healthcare facilities?

Notice the size of the yard—or the lack thereof. Is it well taken care of? Can you imagine the different possibilities you can do here?

2. Go through Inspections

Recently, a family in Ontario made headlines when they ended up spending thousands of dollars for repair. At one point, they needed to apply for a mortgage to cover the costs of modifying their septic tank according to the environmental regulations.

However, they could have avoided all these if they hadn’t skipped inspections. Because the market was hot, they agreed to pay a higher offer and avoid property inspections.

Consider doing home inspections, as it can help you in many ways:

  • You can add it in the contingency clause, which means you have the option to back out of the contract if the seller fails to fix things.
  • They can help you determine how much the repairs would cost. You can then use the amount to negotiate the offer.
  • A home inspection can keep your family safe and healthy. For example, it may spot issues like the presence of asbestos or excessive mold.

What if the home seller or agent doesn’t want you to go through it? Think of it as a red flag.

3. Get Your Home Loan Pre-Qualified and Pre-Approved

Some people use the terms “pre-qualified” and “pre-approved” interchangeably. However, they don’t mean the same thing.

To be pre-qualified means you’ll have an idea of how much you can borrow from the lender. It depends on factors like salary and credit score.

To be pre-approved, though, implies that a lender already provides you with a conditional agreement on the mortgage.

Why do you need both? With pre-qualification, you can set your financial expectations correctly. If the possible loanable amount is lower than what you need, you may have to increase your down payment. Otherwise, it means you have to settle for a cheaper property.

If you are already pre-approved, you may feel more assured that you have the funds to pay the seller. You will also have more accurate information on interest rates and the loanable amount.

4. Read the Fine Print

With homes staying on the listing for a much shorter period, you may think about making it easier for the seller to choose you. That can include not reading the contract and understanding what it truly means.

Keep in mind that you’re less likely to get out of the agreement unscathed once your signature is already in there. To avoid trouble, read the fine print before you sign. Some of the essential things to consider are:

  • Closing costs (buyers can actually ask the seller to share the costs)
  • Closing date
  • Contingencies
  • Inspections
  • Rights and obligations of both parties
  • Earnest money deposit
  • Property conditions (it’s possible that not all parts of the property are part of the sale)

When in doubt, talk to your broker or, better yet, a lawyer. Give yourself at least a week to go through everything.

Although the seller’s market is how right now, you still need to protect yourself. After all, it’s your money and investment on the line. To do that, remember these four tips when shopping for a house.