December 20, 2018
Where Prospective Buyers Sometimes Get it Wrong
Every real estate transaction is in some ways unique—as unique as the personalities of the buyers and sellers—but there are some elements that the industry has done a lot to standardize. Unfortunately, since the prospective buyers in a given transaction are at times the least informed parties when going into the transaction process, they are more at risk than even sellers at making mistakes that may affect their chances of gaining ownership over a home. Because of the standardized nature of the process, a number of these mistakes stand out as especially problematic, and, unfortunately, somewhat common.
Among these situations in which prospective buyers get things wrong—sometimes disasterously—are:
- Making an offer on a home that is well below what the market demands. When a seller’s market is underway—which is the case now, in much of the country; a situation that would be revealed by just a little bit of research—any lowball offer stands the risk of being dismissed out of hand, and the seller may even feel insulted by such an offer, which then lowers the chance of their accepting a later offer even if it has been raised into the reasonable range given market conditions. A seller’s market requires the offering of full price, and may even call for offering above the listing price.
- Not doing themselves the due diligence of researching their options for financing. A number of surveys in the past have discovered that nearly one quarter of buyers grow to regret their chosen lender, mainly because they realize only after the fact that they might have managed to find a better rate had they searched a bit harder; and in some cases the first lender a buyer consults with will feel pressured to go with a particular lending option without recognizing that there are others available. Buyers should always get a loan estimate in writing from each lender they consult with.
- Going on spending sprees after getting their loan approved but before the closing. It can be tempting to assume that, since that rate is locked in and the closing is approaching, it will be all right to purchase some furniture for the new place, get a loan for a new car, or buy a set of plane tickets for that trip to Mexico. But, whether the buyer is using credit or cash to make these purchases, it is not a safe gamble. This affects a buyer’s debt-to-income ratio, or their status of cash-on-hand, which the lender relies upon in creating the mortgage instrument. Doing these things can create delays in closing, wreck the relied upon interest rate, and even potentially cause the transaction to fall through.
- Failing to take the full gamut of closing costs into consideration. We’ve written about this faux pas in detail before, so we won’t go into it here. Just know that the agreed upon cost of the home will usually fall 2-4% below what a buyer ends up paying at closing.
We here at Topouzis & Associates, P.C. are experienced at title searches, and we are supported in supplying title insurance by numerous underwriters. Contact us if you’re getting into a new property, and we’ll put our vast experience to work for you, ensuring clear sailing through the closing process and beyond.