Buyer’s Top 10 Mistakes Series — Mistake #2

Okay, first things first.  My baby girl.  She was born at Norman Regional Healthplex, and it was a FABULOUS facility.  If you’re having a baby, check it out.  My doctor is a member of Women’s Healthcare of Norman, and I adore her.

G was born May 10th, at 5:00-something in the evening.  She weighed seven pounds even.  She has dark hair and (currently) blue eyes, and is a wonderfully well-tempered baby.  She sleeps well, eats well (of course, she’s my daughter; I don’t think there’s much chance of any of my progeny not liking to eat) and seems quite laid-back and content so far.  And beautiful and perfect and all that other blather that you dismiss as hyperbolic and silly until you have your own children and realize that it’s the exact truth.

I see you.

Now then, let’s continue our discussion about common buyer mistakes.  The second mistake we’ll examine is having Unreasonable Expectations.  This is the mistake that does the MOST damage to a buyer’s bottom line.

The two areas in which unrealistic expectations take the biggest toll on buyers are:

1. Misunderstanding Property Values
2. Underestimating the OTHER Costs of Buying

Property Values

Searching for a new home without working with someone who understands how to determine a property’s worth is not smart.  (Gut feelings and what a buyer paid for a similar house twenty years ago simply don’t cut it.)  It can cause the buyer to lose out on genuinely excellent opportunities; it can also cause the buyer to overpay for mediocre property.  It can make the house hunting process frustrating and lengthy, the negotiations unpleasant and abortive, the contract to closing period fraught with setbacks.

The generally accepted truth about home values is: “It’s worth what a buyer’s willing to pay and a seller’s willing to accept.”  And of course it is true — up to a point.  The statement assumes, however, that both buyer and seller are reasonably well-informed and, while motivated enough to pursue the transaction, not under any undue pressure to do so.  So … it assumes things that aren’t really the case for many deals.

There has been so much written, debated, shouted, taught, and re-taught about determining property value that I cannot presume to offer any ultimate word on the subject.  So instead, I’ll just give you the quick-and-dirty version of my own guidelines to buying smart:

1. Never, ever buy the biggest, nicest house in the neighborhood.  It will feel, look, and smell like a deal.  It’s not.
2. Don’t look at homes that don’t match your criteria.  Just don’t.
3. Have your agent do a CMA (comparative market analysis) on the house you like before you draft an offer.  He or she will look at comparable properties (comps) that have sold in the area — ideally in the same neighborhood — and use their sales prices to determine a reasonable range of value for the home in question.
4. Don’t consult non-experts on property values.  Everyone has an opinion; this does not make them an expert.
5. Don’t fall in love.  Okay, yes, I break this one every time.  I fall in love very, very easily — with houses, that is.  And shoes.  And occasional movie stars.  Um.  But, anyway, even if you do fall in love, don’t ENCOURAGE the infatuation, dwell on it, talk about it, until you’ve looked at the comps.  Once you’ve established that the price you’ll pay is justified by the market data, gush all you want.

The OTHER Costs of Moving

Moving is expensive.  Even if you buy a house at a wonderfully low price, the sellers generously pay for all of your closing costs, you get down payment assistance, and you walk out of closing holding a check for your reimbursed earnest money … it’s still expensive.  Not all the costs of moving are paid at closing.

First, there’s the cost of even looking for a new home.  You’re driving around more, and with gas $3-something a gallon, that adds up.  You’ll probably be eating out a bit more often because house hunting takes time, especially during the evening.  If you’re taking time off work, there’s that, too.  When you make a loan application, the lender will often charge you to run your credit.

When you write an offer, you also write an earnest money check.  While it is credited toward your closing costs at closing, it is deposited as soon as the contract is approved, so you must have the funds in your account.  Once you have a contract, you’ll also pay for the appraisal and home inspection(s).

Moving in is expensive, too — there’s the money for movers if you’re hiring someone, or the money for pizza and beer if you’re just bribing friends and family. To turn on the new house’s utilities, the util companies will require deposits.   Also, gasoline and vehicles — and a U-Haul does NOT get the same kind of mileage as my Ford sputnik-mobile.  You’ll probably break or misplace something during the move, and have to run to the store for duct tape or WD-40 or a new whatchemacallit.  Not to mention packing supplies.

And, of course, most homes are not perfectly move-in ready, even the nice ones that smell good and are beautifully staged.  So there’s the cleaning supplies, the paint, the rollers, the toilet paper (hint: move this in FIRST), the blinds to put up so you can take a shower tomorrow without giving your neighbors an eyefull.  There’s the plants and the grass seed and the curtain rod you didn’t notice it didn’t have, and the list just goes on.

Owning a home is expensive, too.  Utilities.  Maintenance.  Upkeep.  More paint and decor and garden pretties and lawn maintenance and … you can see how the idea of “Buying a Home with No Money Down!!!” doesn’t really tell the entire story; unprepared buyers can quickly become overwhelmed and overextended.

So how do you avoid making the “Unreasonable Expectations” mistakes?  Work with an agent who knows the market and is willing to do some research on your short list of possible properties; listen to their opinions and suggestions.  Expect that this will cost some money, and expect that there will be some expenses you did not foresee.  And realize that you can never know everything in advance.  Heck, we can’t know everything even in hindsight.  Prepare and adapt; that’s the best we can do.