It’s not easy being a first-time home buyer, and current market trends don’t favor the newbies. According to a report from the National Association of Realtors, as of 2017, first-time buyers make up about 34 percent of total U.S. home sales, which is a relatively low number when compared to historical trends.
Perhaps first-time buyers realize the process isn’t exactly easy. If you’re about to buy your first home, you’re going to have to learn to evaluate property taxes, identify construction issues, negotiate with sellers, obtain a loan, and save enough money to deal with the inevitable problems that will pop up over the first few months of home ownership.
At some point, you’re probably going to make a mistake—and that’s perfectly fine, provided you avoid some of the biggest pitfalls. Here are a few tips to keep in mind to help you stay sane.
You can’t rely too much on the home inspection.
A home inspector can be an invaluable resource, particularly if you’re new to the whole property ownership thing. The job of the inspector is, of course, to look for obvious defects that could affect the property’s value. This gives buyers a crucial tool during negotiations.
The bad news is that home inspectors aren’t perfect.
“My home inspector pointed out a few wiring problems, doors that didn’t close right, and that sort of thing,” Tim, a 32-year-old writer in St. Louis, tells Urbo. “He missed the big thing: My home was supposed to have a sump pump in the basement, but for whatever reason, the previous owners took it out.”
The result was extensive flooding, which wasn’t covered by Tim’s home warranty. When he looked into getting money from the home inspector, he received an unpleasant surprise.
“According to my contract with the home inspector, I could sue for the home inspection fee, but not for any damages incurred as a result of the things he missed,” Tim says.
Of course, legal liability claims are incredibly complicated, so if you find yourself in a similar situation, contact an attorney—never assume you don’t have any recourse. However, homeowners can avoid a major headache simply by taking a few extra steps to evaluate their home inspector’s credentials.
“In the future, if I buy another home, I’m going to ask questions about each one of the home’s features,” Tim says, “and I’m going to do my research and find a really competent home inspector.”
However, home inspectors can’t protect buyers from every type of issue, so keep that in mind when doing a walk-through of the property.
“Inspectors can only comment on what they see,” says Sep Niakan, owner of HB Roswell Realty and founder of Miami condo sales site Condo Black Book. “They have a trained eye, but if there are hidden secrets lurking behind the walls or out of eyesight, then the inspector won’t catch it.”
Recognize that some issues are fairly easy to fix.
Be realistic when home shopping. Few perfect homes exist, and minor issues with the decor shouldn’t disqualify a home from consideration.
“When we purchased our home, we relied on our feelings a little too much,” says Samantha, a 29-year-old library worker. “My husband and I discussed our impression of each room rather than its practical elements. Looking back, I realize that we were reacting to things that we could easily change—bad wallpaper, old appliances, and things like that.”
Our real estate experts noted that minor issues can drive buyers away from a potential dream home. That’s something sellers should certainly note; a bad coat of paint or a hole in the drywall can make a difference.
“If I was buying a home now, I’d ignore most of the surface-level stuff,” Samantha says. “But I’d definitely look at the pipes. If you’re unlucky enough to buy a home with plumbing problems—like we were—you quickly learn what a galvanized steel pipe looks like.”
Those “fixer-uppers” might not be within your budget.
By the same token, if you think you’re going to be able to save money while gutting a house and renovating it, think again. Little issues can add up, and some homes simply aren’t worth the trouble.
“I just assumed that, since I’m handy, I’d be immune to home-buying woes,” says Victor, a 33-year-old machine operator. “What I didn’t realize: I can handle the repairs, but that doesn’t make them inexpensive. I guarantee you I spent more on updating my home than I would have for a home in better condition.”
Niakan notes that the costs of home renovations can quickly add up, and first-time buyers can easily exceed their budgets within a few years.
“Many first-time buyers might end up being able to afford a fixer-upper or a place they can ‘slowly remodel,’ but once you start on the remodeling journey, you end up finding more and more things that you want to—or, sometimes, need to—change in order to get to your final look,” he says. “And that can get very expensive and time-consuming.”
Don’t let this scare you away from buying a home with a few problems; just be realistic about your abilities and your budget.
If you own your own home, try your best to do any repairs yourself. @YouTube will have just about any instructions you need.
It may take time, but you’ll save $$$ and be super proud of yourself at the same time. Win/win!
— BlackOak Financial (@BlkOakFinancial) April 17, 2018
“I’d still recommend doing home repairs yourself, where possible,” Victor says. “I love my home. But be realistic about what you can do and what it’s going to cost.”
Don’t assume that you’ll be able to easily find a loan, even if you’re “pre-approved.”
You’ve found your dream home, and you’re ready to sign some documents and move in. The hard part’s over, right?
“Most buyers have no idea the pain of the lending process,” Niakan says. “I tell all my clients that getting a loan is just a few notches less painful than giving birth.”
We should note that Niakan hasn’t actually given birth. Still, he’s got some valuable advice for making the process easier.
“To ease the pain, you want to make sure you pick an organized and client-oriented loan officer. Be very organized with your paperwork. I suggest putting all your documents in a Google Drive or similar [internet-accessible] folder, so if the lender asks for the same [document] again, you can easily refer him back to that folder.”
While you may have received a “pre-approval” early in the process, a pre-approval document isn’t binding, and a lender may require a tremendous amount of paperwork to actually move your loan to the next stage. Niakan recommends preparing for a long and arduous (but ultimately rewarding) process.
“Do a lot of meditation to relieve the lending stress,” he says. “The good news is that if you are solid financially, you are very likely to get the loan. You just have to jump through hoops. And, no, you are not going to get into an ‘express lane’ of lending just because you have been a customer of your bank for the last 20 years. The underwriter who approves your loan cares not.”
The price you see isn’t always the price you pay.
First-time home buyers often obsess about the “sticker price” of prospective homes. We can probably thank HGTV shows for that (we’re looking at you, House Hunters). However, a home’s asking price isn’t the only number to consider.
“As a real estate agent, the one thing that most new home buyers fail to consider is the tax rate of the property,” says Joe Lopez of Realty Solutions. “Most websites, when showing the monthly payment, only include the principal and Interest. The tax rate can vary from area to area, and even [homes] within a mile of one another can get different rates. That cannot be negotiated and rarely ever goes down.”
That can drastically affect the overall price of a home. For instance, a home valued at $350,000 in the 60610 area code (Chicago’s Lincoln Park neighborhood) can expect to pay around $7,000 per year in property taxes, per Smart Asset’s property tax calculator. If that same home were located in Buffalo Grove, Illinois, it would incur over $9,000 in property taxes per year.
Buyers should also consider the costs of necessary renovations, homeowners’ association fees, utility bills, closing costs, and insurance. Utilities are obviously one of the larger expenses, so if you’re buying a home, you might ask the seller for copies of a few recent bills.
If you’re able to get through the entire home-buying process without losing your mind, you’ll get the satisfaction of knowing that you’ve purchased a great home at a fair price. Just be ready to make a few mistakes along the way.
“I don’t think it’s possible to buy a home without screwing something up,” Victor says. “I could warn you about cloth wiring and old pipes, but then you might have a termite problem or a flooded basement. Home ownership is really an adventure, but at the end of the day, it’s worth it. Just try to do plenty of research on the financial stuff, and don’t get frustrated—and keep plenty of money on hand for the inevitable repairs.”