Common Mistakes People Make When Buying Their First Home
Have a look through this list of common home buying mistakes to ensure you don’t fall prey to any of these home-hunting snares
Common Mistakes People Make When Buying Their First Home
There are many myths in the world of real estate that can lead first time buyers into trouble. Just because you’ve heard something a thousand times, it doesn't automatically make it strictly true. Here, we wanna highlight some of the most common assumptions that are floating around and help steer you away from making all the wrong moves straight outta the blocks. Have a look through this list of common mistakes to ensure you don’t fall prey to any of these home-hunting snares.
Buyers seeing real estate as a cost and not as an investment
If you compare the returns of real estate directly to most other forms of investment, the numbers might not look so attractive over the long run, but it’s important to remember that when you buy a property, you're also buying a home that you get to live in. While some stockmarket investments might give you a more attractive return, many would argue that no short term win really compares to the daily satisfaction of having the perfect home.
For most, buying property also means getting a mortgage. A mortgage is unlike any other type of loan you are ever likely to receive. Not only can a mortgage bring you taxation benefits depending on your circumstances, it’s also a means to invest in an asset that is worth significantly more than the amount you're willing to lay down from the off. Such opportunities are very rare indeed. No company would ever allow you to buy $100k worth of corporate stock with only a $20k downpayment. With a mortgage however, this is exactly the type of leverage you can expect.
Buying a home can be an incredibly rewarding investment both financially and in terms of your day to day living if you do the research, make all the proper preparations and tick all the right boxes throughout the process.
Buyers believing that purchasing property is risk-free
No investment in the world is bulletproof. Most professionals will agree that real estate tends to offer less volatile risks than many forms of alternative business investment, but even property comes with at least some risk. There are certain situations where individuals would be better off not buying a home and it’s important to know how to determine if it’s right for you or not.
Home-buying is always going to be more of a risk for those with bigger eyes than wallets. No family or individual should ever throw themselves into a position where they’re just about able to afford the finances of the property they’ve chosen. If you’re caught in a position where you’re only just about covering the payments on your house and living costs, what do you think happens if you lose your job or come into some other trouble?
That said, home-buying is certainly not exclusively reserved for the rich. It’s perfectly possible for lower-income families to purchase property that provides the financial cushion to suit them. The idea is to make an investment that is appropriate for you and is not beyond your affordability. Everyone entering the property market is encouraged to think of it as a safer long-term investment compared to others, but nobody should never expect guaranteed prosperity from the get-go. Like all other investments, ample research and respect for the risk are always essential.
Aiming to find a bad property in a nice area
This is one of the most common light bulb ideas almost all first-time buyers get as soon as they decide they want to buy. Yes, location is very important and goes a long way in determining the value of a property, so why not just settle for the runt of the litter in a really nice location? Well, when you buy a home, one of the key elements to understand is how your property will change in value over time. Research has shown that properties within the lower end of a given area price range tend to increase in value at a slower rate than those around them. So in terms of keeping up with the neighbours, you could be swinging and missing by aiming to buy the worst home in a higher end area.
It can actually turn out to be one of the worst approaches you could take. The value of a property is almost always determined by demand. So when looking at the most affluent areas, most people looking to move to that location are not looking for a bad home, the majority will actually be looking for as good as they can get.
If you have a bad property in a great area, it won’t be very good at attracting the typical buyers that look into that location and you could struggle to find buyers with serious interest. This can lead to the value of these types of properties either stagnating or in the worst cases depreciating over time.
There’s also the fact that when potential buyers see a house that is cheaper than those around it, the alarm bells ring. Every buyer is undoubtedly going to be thinking, “There must be something wrong with it”.
The way to give yourself the best chance at making a sound investment is actually to either hit the nail while it's hot in an area that is seeing higher than average growth or buying in a neighbourhood where you can afford a property that sits above the bottom 10 - 15 % of local listings.
Trying to hunt exclusively for foreclosures to get the best deals
Right after a housing bust, foreclosed houses are everywhere and certainly seem like the way to go as they can offer such incredible value in such environments. Outside of an economic downturn, however, this is not always a sensible option.
Foreclosed properties are usually sold at a discounted price for a reason. The previous owner wasn't able to keep up with their payments and this often leads to deterioration of the home's condition. Anyone having trouble keeping up with their mortgage is going to have an even harder time keeping up with things like general repairs, maintenance, gardening and a whole host of other home care needs.
You might be looking at a bargain on the listing page, but it’s always important to remember that you almost always get what you pay for. If you’re looking to move into a home that’s ready for comfortable living, it’s always best to compare options that are in similar conditions to one another and avoid being sucked into foreclosure deals that are too good to be true.