Mistake _11. Getting Family, Relatives, and Friends Too Involved

Not involving family or friends can sometimes be difficult. If mom and dad are putting up the down payment or cosigning on the mortgage, then they’ll be a big part of the deal. Otherwise, getting too many opinions can be worse than no opinions at all. Often, those whose opinions you seek will see your enthusiasm and support your decision, even if it’s a bad one. Or people who don’t know what they’re talking about will point out problems and bad mouth a good home.
Greg and Linda found this out when they bought their first home. Naturally, they were excited and wanted to get as many friends and relatives involved as they could. Unfortunately, it didn’t work out quite as they hoped. The more friends they took through the home, the more confused they got. Some friends loved it, others didn’t. One uncle even told them they were making a big mistake by moving into that neighborhood. After a week of getting bombarded by mixed messages, Greg and Linda developed such a bad case of buyer’s remorse that they called their agent and told him they were backing out. They couldn’t stand the pressure and would gladly forfeit their $500 deposit. So how do you avoid this situation?
First, rely on your agent, who is a professional and knows the areas and pitfalls.
Second, trust your own research. You’ve undoubtedly looked at a dozen or so homes in your price range, so you should have a pretty good idea of values and neighborhoods by the time you’re ready to make a decision.
Third, when you find a home you want to make an offer on, the last thing you want to do is involve Uncle Louie or Cousin Joe, who happens to be a contractor. Now matter how good they are, builders or contractors are not professional home inspectors. They may be skilled in their particular trade, but they’re not trained to find the potential problems a professional home inspector is. Don’t make the mistake of trying to save a few hundred dollars by short cutting the inspection process. Having anyone other than a professional inspect the house and give you a written report can come back to haunt you. Going back to the seller with a written report from a pro that the roof needs to be replaced carries some weight. Going back and telling the sellers that Uncle Louie says you have a bad roof doesn’t quite cut it.
The bottom line is to go with the advice of your buyer’s agent and home inspector; they’re the pros who can help you the most. If you want to involve family, relatives, and friends, have a barbecue at your new house after they help you move in.

Mistake 10. Not Protecting Yourself When You Make an Offer

Many homebuyers, in the excitement of finding their dream home and writing up an offer, forget to add contingencies that will protect them. A contingency is a clause that is added to an offer to make it subject to a certain event. Common contingencies are financing approval, house inspection, closing on a certain date, and replacing a roof. It’s true that some contingencies will weaken your offer, such as selling your house first or adding a list of repairs. But there are others that you need to add to protect yourself.
For instance, one buyer’s agent insisted on putting in a ‘‘subject to final loan approval contingency’’ in her client’s offer, even though he was approved for a mortgage. Unfortunately, two days before closing, the buyer was laid off his job due to downsizing, eliminating any chance of final loan approval. His agent saved him from losing a $1,000 deposit.
The most critical clauses you should consider adding are:
Always make your offer subject to a professional inspection. If you find problems, then you have some leverage to fix them or walk away and get your deposit back.
Making your offer subject to final loan approval will protect you from something unforeseen. For instance, should you get laid off during the loan process, you’ll lose the chance to buy the house but not your deposit.
If you’ve made an offer on a new home and your old home hasn’t closed yet, add a clause making it subject to closing the old house and funding.
You want the offer subject to the home appraising for at least the sales price. If the appraisal comes in low, you’ll have the option of negotiating the lower price or walking away. Along with final loan approval, inspection contingencies are the most important protection for a homebuyer. In one particular case, a home inspector found a cracked combustion chamber in the gas furnace. This can allow carbon monoxide to escape into the house with lethal consequences. The sellers quickly had the furnace replaced and the deal closed. Luckily, a potentially serious accident was avoided. In another case, an inspector found problems with the wiring. It was not only old, but the owner had tried to cut costs and do some rewiring himself. The wiring was not only not up to code but was dangerous, with illegal splices and unconnected hot wires in the attic. In this case the buyers simply negated the offer and got their deposit back because it was subject to a satisfactory inspection.

Mistake _9. Overextending Your Budget

A lender who pre-qualified you for a loan may tell you that you’re able to buy a $150,000 house. But keep in mind that buying for the full amount you can qualify for may put you out of your comfort zone. It’s not uncommon for homebuyers to purchase the max they’re qualified for and not have the cash flow to decorate or put in the yard for a few years. Some homeowners can handle this, while others are frustrated by having no furniture or a dirt yard. For most people it works out better to go for a smaller house and be able to put in a yard or redecorate.
Now that qualifying ratios are more credit driven than in the past, lenders are approving debt ratios as high as 65 percent. That means that your house payment and all other debts equal 65 percent of your income. Some families can handle that kind of debt load, while others would go bankrupt fast. It’s up to you to look at your lifestyle and realistically determine what you can handle. However, there’s another way to look at the amount of home you can buy.
Some people claim you should buy the most home you possibly can now. As your income goes up and home values rise, you win. You not only save a move but end up with more equity and a home you’ll enjoy more.
This approach worked for many owners who bought in the last 30 years and have watched their homes’ value soar dramatically. Many of these homeowners say they struggled in the beginning, but as their incomes went up, the house payments took a smaller part of their paycheck.
Fred and Rhonda were among those homeowners who bought their home in 1979 for $32,000 and recently sold it $196,000. According to Fred, their house payment in the beginning took nearly a third of his income. By the time they sold it, it was nearly paid off and took less than 10 percent of his paycheck.
Neither way is right or wrong. It just depends on your values and priorities.

Mistake _8. Buying a Property That’s Hard to Sell

This is one the biggest mistakes homebuyers make. It happens so often that you wonder what buyers are thinking when they sign the purchase agreement. The most common reason given by these homebuyers for why they bought a certain property is that it was such a good deal. It was the biggest house they could find for the price.
Typical hard-to-sell properties are:

• Homes that back up to railroad tracks, freeways, industrial areas, frontage roads, etc.
• Homes that have been overimproved for the area. A typical example would be a 900-square-foot bungalow with an addition on the back or side. Sometimes it’s a well-planned addition that blends in; other times it’s a tacky add-on. Neighborhoods that have become run down with a high percentage of rentals or foreclosed properties.
• Homes that stray too far from the architectural mainstream of what people are buying. Typical examples are round homes, earth-covered homes, and conversions from other buildings, such as barns, silos, and sheds. They can be quaint and even be featured in a home magazine, but selling and getting back the money invested in them is not always easy. Properties that have lot or landscaping problems. Examples are a steep slope for a backyard or a gully; little or no backyard; or no privacy from neighbors. The way a house sits on a lot can also affect value. And of course the most common problem is exterior and interior colors that don’t complement or fit the house. You may love bright blue, but if you paint your house that color, you’ve just reduced its value considerably.

One instance of a homeowner making a property impossible to sell involved a buyer who spent $30,000 adding on to a small (800-square-foot) 40-year-old house. It was done professionally and did blend in. Still, the end result was an older house with an add-on. In this case, the most it would add to the house’s value was around $10,000. Unfortunately, the owners had taken out a second mortgage to do the addition, and now they couldn’t sell the home for anywhere near what they owed.
For them the worst case was that they would have to stay in the home for a few years until they paid down the loan. It could get ugly if they had to move because of a job transfer in the next few years. Another common reason buyers give for purchasing these properties is that they can fix them up or correct the problems. That may be so, but by the time they add up the costs and time, it would have been much cheaper to buy a better house or a better location. When you look at a property and see a negative but feel other features may outweigh the problems, especially price, slow down and think it through. There are red flags waving.

Mistake #7. Buying a Home on Impulse

Too many new homebuyers and existing homeowners fall into the trap of going through a model home in a new subdivision, and the next thing they know they’ve committed to buy. You need to look at several new home projects and 10 to 20 existing homes before you get serious. New homes are professionally decorated and carefully arranged to push your emotional buttons. Existing homes are sometimes spruced up or staged to do the same thing. Resist the temptation to buy before you look around and know what’s available in your area. If you’re living in a one-bedroom apartment, anything over 900 square feet can look spacious. The impulse to grab the first home that tugs on an emotional string or two is strong. If it’s a new construction, check out the builder’s reputation. Talk to three or four people who bought from that builder and listen to what they have to say. This is also a great way to see what your neighbors would be like.
Mike and Linda were seriously considering buying a home in a new subdivision. They loved the style and floor plan of the models and had even talked to the builder’s lender. But before they committed, they decided to check with several homeowners on one of the first streets built in the subdivision.
They learned there were some unresolved drainage problems and that several homebuyers were considering legal action. Also, many of the callbacks took several weeks to resolve, and then only after repeated calls. It didn’t take long to realize that the builder didn’t have too good a reputation, and further checking revealed he had declared bankruptcy less than a year ago. That was enough for Mike and Linda to write that project off their list and move on. Luckily they did, because that development was featured on a local news channel a couple of months later for the problems the homeowners were having with the builder and developer.

Mistake _6. Buying the Wrong Type of House

How you can buy the wrong type of house seems hard to imagine, but it’s a major reason many homeowners move. For instance, you love the picturesque look of two-story homes but find having a family room in the basement is not what you want. A ranch with an open floor plan is more what you really desire for family togetherness. Or you buy a home with the laundry room in the basement, and after awhile you find going up and down the stairs is a real pain. You need to look at how the house will function for your family. How do you really live? Do you really need a formal dining room and living room? Would you be happier with an eat-in kitchen and a great room and a den to use as a home office? The house only needs to fit one family—yours.
Sam and Becky made this mistake when they found a charming two-story house in a great neighborhood near Sam’s work. They were renting a home but wanted a place of their own. They made an appointment to see the home and immediately fell in love with the oak trim and crown molding, as well as the formal dining room and updated kitchen. The next weekend they took their three boys ages 5, 9, and 12 through the home. The kids loved the backyard with the big sycamores, but understandably they were not too happy to leave their neighborhood and school. But it was summer, so changing schools was not a problem.
An offer was made and accepted. Thirty days later the loan closed and Sam, Becky, and kids moved into their own home. They were excited and the first couple of weeks were fun. But then, the time came to register the kids for school, and Becky found out the school was two miles away, which meant the kids would have to ride the bus. She also found out that there were no families in the neighborhood with elementary school age kids for a possible car pool. It was a middleaged neighborhood that they soon found out they had little in common with.
It wasn’t long before Becky also realized that the formal floor plan of the two-story wasn’t kid friendly. They wanted to be near the kitchen where mom was, not downstairs in the family room or in the upstairs bedrooms.
About a year later Sam and Becky put the home up for sale and started house hunting again. This time they were determined to be a little wiser and do some homework before they jumped at a home with enticing curb appeal.
It’s important to put some thought into what your family lifestyle is and make a list of important things you want in a home. Don’t be swayed by a cute restored bungalow just like the one you grew up in, if a bilevel fits your family better. Every once in awhile take a deep breath and do a reality check when you’re out house shopping. Try to project what your needs will be in five to ten years from now. And don’t let awesome curb appeal sway you if the floor plan doesn’t fit your needs.

Mistake _5. Not Checking Out

First-time and experienced homebuyers sometimes fall into this trap. They see a house that pulls the right strings and pushes the right emotional buttons, and they buy. Overlooked is the neighborhood. Questions that should be asked but often aren’t include, ‘‘Are there gangs?’’ ‘‘Is there a neighborhood crime watch group?’’ ‘‘What is the age makeup? ’’ ‘‘Is it a transient neighborhood with a high turnover?’’ ‘‘How are the schools, and is the home on a busy street?’’ No matter how much you like your house, if the neighborhood doesn’t fit your lifestyle, you’ll be selling before too long.
Juan and Rita found this out when they bought a cute, renovated bungalow in an older neighborhood. They soon found out that their neighborhood had several teens who liked to race up and down the street, and three of the homes on their street were rentals. The yards were not being taken care of, and obviously the area was going downhill. Unfortunately, Juan and Rita were not using a realtor when they bought the house. They had driven by the home and noticed a ‘‘for sale by owner’’ sign. The sellers were an older couple who wanted to move to a warmer climate and offered them a good deal on the home. The buyers were so focused on the home that they didn’t even think about the area. To avoid making this mistake, spend a lot of time in the neighborhood before you buy. Check out the different ways you can get to the house you’re interested in. How close are shopping, schools, and other areas of interest? And finally, how quiet is the neighborhood at different times and on weekdays as well as on the weekend?

Mistake _4. Not Having an Exit Strategy

Many younger first-time homebuyers purchase one-bedroom condos, small two-bedroom homes, and PUDs. They don’t stop to think that in a few years their home will become too small when kids come along and/or their income increases. Too often, these smaller properties are hard to sell and accumulate less equity than homes with two or more bedrooms will.
Nick found this out when he bought a one-bedroom condo after he got his first job right out of college. Hearing that it’s better to own than rent, he visited a new condo project. Smitten by the amenities and lifestyle image the development offered, he bought one and lived there for two years.
After meeting his one and only, Nick got married and the couple lived in the condo for two more years; when a baby came along, suddenly, the one-bedroom became a tight fit. A bigger home soon rose to the top of their priority list and they started looking. There were some nice homes they could afford, but they would have to sell the condo first.
So Nick talked to a realtor and found out that because quite a few units were for sale, getting a buyer was going to be a slow process. To sell the condo, he would probably have to discount it close to what he owed because other owners had dropped their prices to rock bottom. The condo has been on the market a year now, and there haven’t been any offers. Nick is seriously considering renting it out if he doesn’t get an offer in another couple of months. As Nick learned the hard way, before you buy property, think about how long you intend to live there. Remember that the average homebuyer stays in the home about six years. So it’s important to do some what-if thinking before you commit.

Mistake _3. Not Getting a Preapproval Letter

A branch manager at First American Title Company recently estimated that about 30 percent of the transactions at her branch fall apart or get delayed before closing. The biggest reason is that buyers don’t have their financial ducks in a row before they make an offer. Sometimes this results in lost time and embarrassment; other times earnest money is forfeited, too.
You can solve this problem by contacting a mortgage lender before you start looking at homes. Go through the complete preapproval process and get a letter from your mortgage lender stating you’re good to go for a certain dollar amount.
This preapproval letter gives you the following advantages:

1. You’ll know exactly how much home you can afford, how much down payment you’ll need, and what your closing costs will be.
2. You won’t waste your time looking at homes not in your price range.
3. When you do find the home of your dreams, you’ll be able to make a strong bird-in-the-hand offer that sellers will find harder to counter.

When Ryan and Brittany felt they were ready to buy their first home, they met with a lender recommended by their buyer’s agent. After a credit check and verification of their employment and source of down payment, the lender issued a preapproval letter. The next step was house hunting, and after a couple of weeks, Ryan and Brittany found their dream home. When their agent called to arrange a time to present the offer, she was told there was a competing offer the sellers would also be considering.
Both offers were presented to the sellers, and the competing offer was $1,500 higher than Ryan and Brittany’s offer. Their agent, a real pro, pointed out to the sellers that her clients were loan approved and gave them the letter from the mortgage company. She noted that her clients’ offer was a bird-in-the-hand, that they could close in three weeks or less, subject only to the appraisal. The competing buyers’ agent had not gotten his clients preapproved, and their offer was subject to mortgage approval.
The sellers chose to go with the preapproved offer over a $1,500 higher but riskier offer. Obviously, they didn’t want to take their home off the market and wait a week or two to find out if the buyers qualified. Timing and a sure-thing approach will often win out over a higher offer.

Mistake _2. Buying a Home Before You’ve Sold Your Current One

If you own a home and want to move up, signing a purchase contract can be risky and cost you big bucks if your present home is not sold. Too many homeowners who want to move up write an offer or sign a construction contract before putting their home on the market. Sometimes, these homeowners feel their home will sell quickly because it’s the nicest one in the neighborhood, or they don’t stop to consider what the consequences will be if their home doesn’t sell.
These mindsets can have the following consequences:

1. It can be expensive if you sign a construction contract and want to wait two or three months to sell so that you don’t have a double move. You might find that the market has changed, your home may not sell, and you could end up in a squeeze play. You discount the house to sell and then find the money you planned on for your new home is much less.
2. Your home doesn’t sell and you end up renting it or working out a creative financing deal with risky buyers. Usually, these pressure cooker deals have a 90 percent chance of ending up in default.
3. You make an offer subject to your home being sold. If the sellers are on the ball, they will require a clause that if a buyer comes along, you have three days or less to perform. If you can’t, the offer is void and your time and energy are for nothing.

Sometimes, the timing will work out and you can pull it off. People win the lottery, too. But for most homebuyers, the risks outweigh the rewards.
Robert and Andrea found this out when they waited until their new home was 60 days from completion before they put their old home on the market. They hoped to sell and move into their new home and avoid a double move.
Unfortunately, their old home needed some work to make it saleable, and Robert and Andrea weren’t willing to put time or money into it because they were focused on their new home. When their new home was finished and ready to close, the old home hadn’t sold or even had an offer. So they refinanced it for the maximum possible to get money to close on the new home. Without any other options, they rented out the old house to cover the payment. After a year, the rental is still costing Robert and Andrea about $210 a month because the rent doesn’t cover the mortgage payment. The home is going downhill fast because there’s no money or desire to do the deferred maintenance, and the loan is about $20,000 more than current market value.
The best way to avoid this kind of situation is to sell your home first. Put everything you don’t immediately need into storage and rent an apartment or stay with relatives until your new home is finished or you find your dream home. In a hot seller’s market, you may not have to worry about timing as much, but in a normal or slow market, you’ll need to get your ducks in a row before you make your move.

Mistake _1. Not Planning Your Move

Many first-time homebuyers who are renting get into problems with their lease. They make an offer on a home, forgetting that they still have several months left to go on their lease. Sometimes, there’s a stiff penalty when you break a lease. Other times, you just forfeit your deposit or the landlord may hold you to the balance left on the lease. In one particular situation, a young couple made an offer on a home with a $1,000 deposit that was subject to mortgage approval only. When they informed their landlord that they were moving, he politely informed them they had three months left on their lease. They could move out, but he expected a check for the three months or $2,700, or he would enforce the terms in court. In the end, the homebuyers couldn’t cover both the down payment and the remaining lease payments, so they lost both the house and their $1,000 deposit. The lesson learned is that if you’re renting, read your lease agreement carefully. If in doubt about the terms, talk to an attorney. In another similar lease situation, rather than have the deal fall through, the sellers renegotiated the purchase agreement. They paid two months of the buyers’ remaining rent and upped the price to cover the third one. It was a slow market, and the sellers felt that giving the buyers a concession would be cheaper than putting their home back on the market. Luckily, these sellers took a pragmatic approach to getting their home sold.
To avoid this problem, don’t sign a year or six-month lease and then start house hunting. Sellers are usually reluctant to take their home off the market for more than 30 days. When you’re seriously ready to buy and your lease is ready to expire, see if your landlord will extend on a month-to-month arrangement with a 30-day notice.

Retirement Subdivisions

Communities that cater to retirees are usually more stable than those that attract first-time homebuyers. They normally don’t have a threeto five-year selling bubble that can depress prices. These homeowners often stay until they move into a nursing home or die. This often results in a relatively stable home market with the number of homes for sale roughly equaling the number of buyers. In some upscale communities with a big demand, there can even be buyers circling and waiting for a home to come on the market. As a result of supply and demand, homes in these areas can consistently go up in value.
Even though you’re retiring and plan on staying in a home forever, it’s still important to buy in the best area possible. You’ll enjoy the community more, and if you decide to sell the home it will have appreciated in value.
To make sure you’ll like the community, walk around the lots or homes you’re interested in. Meet the neighbors on both sides and across the street. Ask questions about the area and read the restrictions and homeowners association rules. If there are problems, you’ll hear about them fast.
The bottom line in buying a manufactured home in a retirement community is to go for the best location you can afford. If it’s a new community, look at the area closely. Make sure there’s nothing in a master plan like a freeway, airport expansion, or planned rezoning in the works that could lower values.