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All real estate transactions – whether residential or commercial – are major financial deals that require your full attention. While it’s often the case that residential deals involve fewer dollars, they can in some ways feel more stressful, as they are executed by individuals rather than businesses. There is a good chance that your upcoming residential real estate deal will be the largest financial transaction of your life.
So, you don’t want to get it wrong. Doing everything properly from start to finish will protect you and make it far more likely that you come away with a great deal in the end. Let’s look at some common mistakes in residential real estate and how they can be avoided.
Skipping a Home Inspection
Without a doubt, this is the biggest mistake that is made on the buyer side of the transaction. For some reason, many people think that they can simply skip over the home inspection and get away with it. While you might get lucky and have things work out without an inspection, this is a risk that isn’t even close to being worth it in the end.
You simply can’t judge the health of a home by looking at it cosmetically. If you just walk through the house and think that it looks like it is in “good shape”, you haven’t seen nearly enough to make that determination. And, even if you looked closer, you probably don’t have the knowledge or training to know what you are looking at.
The relatively modest cost of a home inspection pales in comparison to what you are paying for the house. If nothing else, the inspection will buy you peace of mind in knowing that you are purchasing a property that is in great condition. And, if something is found during the inspection that gives you pause about buying the property at all, you’ll have dodged a major bullet.
Overlooking Greater Market Trends
No residential real estate transaction happens in a vacuum. All of these deals go down within the context of the market as a whole, and both buyers and sellers should understand those market dynamics so they can make informed decisions.
One of the biggest pieces of this puzzle is understanding whether it is a buyer’s or seller’s market in the big picture. When there are more houses available than interested buyers, that is a buyer’s market – and just the opposite is true when there are a ton of qualified buyers and a low inventory of houses.
These market dynamics matter because they can influence your negotiating decisions and what kind of offer is made on a property. For example, if you are a buyer in a seller’s market, you’ll likely need to act quickly before a house sells, and you may need to offer more than asking price to close the deal. Such actions wouldn’t make much sense in a buyer’s market, as you could take your time and try to work the price down as low as possible to get a great deal when you have the advantage. Knowing what is going on in residential real estate in your area and acting accordingly is a big step toward a positive outcome.
Failing to Get Pre-Approved
Going shopping for a house without first being pre-approved for a mortgage is a recipe for disaster. This is the same as going to the grocery store to fill up your cart without knowing how much money is in your pocket. You could pick out the ingredients for a great meal only to get to the register and realize that you can’t afford what you’ve selected.
The pre-approval process does take some time and effort to complete, but it’s all stuff that you will have to do eventually anyway. If you are going to be using a mortgage to purchase this house, you’ll have to do a bunch of paperwork and go through credit checks and more – so why not do it now instead of later? Knowing precisely how much you are qualified to spend on the house will allow you to only look at properties that are likely to be in your price range.
Pre-approvals are largely for your own benefit, but they can also help you gain an edge over the house-buying competition, as well. When you make an offer and the seller sees that you are already pre-approved for your loan, that offer is going to carry more weight than one without a pre-approval. So, you’ll be shopping with more confidence, and making a stronger offer when you do find that ideal property. This is a win-win move all the way around.
Not Working with Professionals
It’s admirable to want to do as many things as possible on your own in life. The DIY lifestyle is appealing for many reasons, but it simply opens you up to too many risks when talking about a real estate deal. In this case, you want to have professionals on your side, and the money you pay them will be more than worth it in the end.
You probably first think about a real estate agent when it comes to buying or selling a piece of residential property. That’s a good starting point, but it’s not the end of the story. You would also be wise to have a residential property lawyer on your side who can offer residential real estate services. With an attorney as part of your team, you will have someone who can help you plan negotiations, review and draft contracts, perform important title searches, and much more.
If possible, it’s ideal to build a “dream team” that consists of an experienced real estate agent and a knowledgeable attorney. Between the two, you’ll have everything you need from a market and legal perspective to make informed choices and stand up for your rights. So much of the stress that usually comes with buying or selling real estate can melt away when the right professionals are working for you.
Being in a Hurry
We can acknowledge that, in some cases, it’s not possible to avoid rushing into a residential real estate transaction. If you just have to move quickly, and you need to buy a home to settle your family into before an upcoming deadline, your hands will be tied and you have to do what you need to do to make it work.
That’s not the case in most real estate situations, however. Assuming you have some time to work with, it’s best to be as patient as possible while working out a deal. All that happens when you are in a rush is you wind up cutting corners and making sacrifices just to get things done. That could take the form of paying more than you wanted for a property, or not negotiating certain elements of the contract to swing them a little further in your favor. Also, as mentioned early in the article, you might wind up skipping the home inspection because you want to get this done as fast as possible, and that’s a mistake that you don’t want to make.
Poor Negotiations
Finally, there is the error of bad negotiating that needs to be mentioned. There is an art to properly negotiating any kind of deal, and many people who are buying their first home just haven’t developed that skill in any meaningful way. In fact, they might not be comfortable asking for anything in the deal and may feel like they should just make a full-price offer and not “rock the boat” by making additional demands.
This is a problem because it is inevitably going to lead to you not getting the best possible deal in this transaction. The solution, of course, is to have someone else negotiating on your behalf. Whether it’s a lawyer, a real estate agent, or a combination of the two, you should have representation during this process to make sure it is done right.
Your agent or lawyer won’t be afraid to negotiate and will be getting paid to stand up for your side of the deal. You can have friendly meetings with your team to go over what you’d like to accomplish, what you are comfortable paying, etc. Then, they can interact with the other side – either a seller or their agent or lawyer – and go back and forth until a deal is hammered out that everyone is willing to sign.
Get Help Right Away
You shouldn’t feel scared going into a residential real estate deal, whether it is a purchase or a sale. As long as you have done your homework, planned out your actions, and chosen the right team of professionals to help you, everything should be just fine in the end. If you have been searching for “residential real estate lawyers near me” with no luck, now is the time to get in touch with Fisher Stone to have a conversation. We’d love to chat!
