5 things homebuyers shouldn’t do – Forbes Advisor

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Many buyers today are compromising on their wishlist – goodbye, upgraded kitchen and patio – as prices have skyrocketed and the number of affordable homes for sale is scarce.

Home prices have continued to rise, jumping nearly 20% per year in July, and mortgage rates continue to rise steadily, eroding the purchasing power of many home seekers. This is especially difficult if you’re a first-time home buyer with a smaller down payment and start-up budget.

No matter what your financial situation, most homebuyers have to compromise to win a home in today’s booming housing market. But there are some things you shouldn’t compromise on.

We’ve rounded up advice from real estate experts outlining five areas where buyers shouldn’t cut corners.

1. Neighborhood

Most real estate experts say buyers shouldn’t compromise on their neighborhood. This can be a difficult characteristic to adhere to, as houses of similar construction may have different prices depending on the area.

It’s critical to make sure that you enjoy the place you live, at least for the next 5-10 years, as most buyers won’t make a huge profit if they immediately turn around and sell the home they are. they just bought after paying the mortgage closing and moving costs. , and maybe home improvements.

Buyers can “fix most things about the house except the location,” says Dawn Pfaff, founder and president of My State MLS, in Jupiter, Florida.

Andy Taylor, vice president and general manager of home and new businesses at Credit Karma, advises interested buyers to thoroughly research the neighborhood they are interested in before they buy, because it’s one thing you can’t. not easily changed once there. .

“With enough money, the walls can be painted and rooms can be moved, but you’ll still be in the same neighborhood you started out in,” says Taylor.

Talk to the people who live in this neighborhood and find out if there are any issues that might not be obvious to a casual observer. For example, is there a band training in the garage next door or someone having a lot of parties in their backyard (if you prefer silence)? Is the Homeowners Association (HOA) useful or an expensive nightmare? Locals can provide you with this information.

Before you buy, walk around the neighborhood at different times of the day, on different days, to get a better idea of ​​what it’s like to live there.

“Is it lively and trendy on weekends or at night?” Is it a quiet respite from a nearby town? This is especially important if you plan to work at home all day and then spend your nights and weekends there in your spare time, ”says Taylor.

The other downside to buying in a neighborhood you don’t like is that it can also be difficult to sell if interested buyers hear a lot of noise or something that puts them off in the neighborhood.

2. School district

Buyers with families should take a close look at the school district, as this affects the price you will pay for a home and your ability to sell it for a higher price.

Neglecting this important feature of the neighborhood can come back to “bite you” no matter how good the home is, says Dottie Herman, vice president of Douglas Elliman.

“Don’t skimp in your research on your school district and fully consider the options available,” Herman said. “It’s a quality of life consideration that should be taken into account before you buy.”

Studies have shown that housing costs are higher in neighborhoods where public schools perform well. This means that parents who want to put their children in better schools might have to pay more for a smaller house with fewer amenities.

3. Daily travel

Some studies suggest that longer commute times are associated with higher stress levels. Additionally, the type of commute you have – active (walking, cycling) or passive (driving, bus ride) – can also have an effect on your overall well-being.

So, if you are considering buying a home further away from your job or your children’s school, it is worth considering how this could impact your day-to-day comfort and happiness.

One way to get a taste of a longer commute is to practice taking that route a few times before purchasing, during your normal commuting hours. A 15 mile drive might seem manageable on paper, but if it takes an hour one way in heavy traffic, it may not be worth it for you on a regular basis.

“Proximity to transport is important. Take the car or train ride to see how long your daily commute can last, ”says Herman. “Also, if you use public transport, check the timetables and think carefully about how much time this might add to your daily time spent on transport. “

4. Don’t make repairs beyond your budget

Cost-conscious homebuyers are wise to avoid shiny new additions, like granite countertops or giant closets, which can quickly increase your bottom line.

Over time, homebuyers can upgrade cosmetic features like knocking down walls to add more space or general changes they want within their budget. However, that doesn’t mean you have to buy a repairman, but there are some rough diamonds that can save you money.

On the flip side, some of these rough diamonds can end up being a money pit. It is therefore important to know the difference between the repairs that are achievable and those that can drain your savings.

Jerry Koors, President of Merchants Mortgage at Merchants Bank of Indiana, urges buyers to fork out extra cash (between $ 300 and $ 500) for a thorough home inspection as it could save thousands of dollars .

“High value items that need to be repaired should be taken care of before you buy the house. Things like the HVAC, roof and windows are important items that a first-time buyer may not have the money to fix if something goes wrong after purchasing their first home, ”Koors said. “They should negotiate them before the purchase, if possible.”

5. Personal savings

There was a 22% drop in active homes for sale in September from a year ago, although monthly inventory declines are starting to stabilize. This stressful scenario can lead to buyers wanting to exceed their budget in order to earn the least amount of homes available for sale. But experts warn that being “poor house” is dangerous for your finances.

The recommended amount you should spend on a house varies depending on who you are talking to. But some experts advise spending no more than 28% of your monthly gross income on housing costs, which include the mortgage payment, taxes, insurance, and any other costs (such as homeowner’s association dues). While others are more conservative and recommend a maximum of 15-20%.

Whatever your budget, it’s important to make sure you have enough money set aside for repairs and other emergencies (job loss, for example) as well as retirement savings.

“You don’t want to be poor at home. Nothing is worse than buying a sparkling new apartment but having to eat Top Ramen all week to pay your bills, ”says Jason Warner, real estate salesperson at REAL New York in Brooklyn. “Just because you qualify for a $ 700,000 house doesn’t mean you have to spend that. “

In order to determine if buying a home is within your budget, you can calculate the numbers using a mortgage calculator, which will estimate everything from principal and interest payments to insurance costs and by HOA.

Final result

With home prices continuing to rise, it is expensive to buy a home these days. The last thing you want to do is get something that you end up regretting. Look for a good real estate agent who has experience in the area and makes good recommendations because they can help you make the best decisions when it comes to buying a home.

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