Many overlook contingencies, affordability, closing
Low interest rates and home prices have convinced some homebuyers that now is a good time to buy. If you’re a first-time buyer or haven’t bought in awhile, take heed of mistakes you’ll want to avoid.
Buying a home takes time. Invariably, your life will get busy as soon as you get serious about buying. Working with a good real estate agent who knows your area well, stays on top of details, and communicates promptly and clearly definitely helps.
However, never forget that you are the decision maker. Letting your agent make decisions for you may seem like a time-saver. But, letting your agent make decisions can lead to trouble if you and your agent don’t see eye-to-eye.
To save time, take the initiative and find out as much as you can about a listing before making an offer. It’s a waste of time to get into contract before investigating an issue that’s critical to you, such as the length of your commute.
It’s not a good idea to buy a home without having it inspected by professionals. Your offer should include an inspection contingency that gives you a way out of the contract without penalty if material defects are revealed that you can’t live with and that the seller won’t correct.
HOUSE HUNTING TIP: Multiple offers are making a comeback in some markets, particularly in the low-end foreclosure market. When there is competitive bidding, some buyers waive contingencies to better their offer. This is a mistake. Rather than make a risky offer, look for another home if you aren’t the winning bidder.
Find out what price you can afford to pay before starting your house hunt. The mortgage qualification process has changed significantly during the past year. Get preapproved for the mortgage you’ll need to complete a home purchase. Then, decide how much you feel comfortable paying.
Be sure to factor in the cost of home maintenance. This is often overlooked, particularly by first-time homebuyers. …CONTINUED
The more rigorous mortgage qualification process means that it takes longer to close sales. Mortgage bankers and portfolio lenders can close faster than lenders who package their mortgages to sell to Fannie Mae and Freddie Mac. Before making an offer, find out how long your lender will need to close so that you don’t have to request an extension.
Foreclosure listings are attractive because they are often priced under market. Some buyers have lost out repeatedly in multiple-offer competitions. Recently, such a buyer was interested in two foreclosure listings. The buyer thought he’d better his chances if he made offers on both listings.
This is risky. If both sellers accepted, he would end up in contract to buy two houses. He could withdraw from one, but there might be unpleasant consequences if it became known that he had made more than one offer at a time.
To avoid repercussions, you could include a clause in the contract notifying the seller that you were making offers on more than one property, and that ratification of the contract required your signature of acceptance.
If your offer is the best, a seller might go for this. But, if there are other good offers, the seller would probably accept one from a buyer who was completely committed to the purchase.
Short-sale listings require lender approval because the sale price is less than the amount owing on the mortgage(s). Be sure that you include a provision that lets you withdraw from the contract without penalty if you don’t receive lender approval by a certain date. One couple spent seven months waiting to hear back from the lender on an offer to buy a short-sale listing.
THE CLOSING: When they finally heard, the lender rejected the offer.
Dian Hymer is a nationally syndicated real estate columnist and author of “House Hunting, The Take-Along Workbook for Home Buyers” and “Starting Out, The Complete Home Buyer’s Guide,” Chronicle Books.