Buying a home comes with an endless amount of excitation, but when making one of the most significant purchases of your life, a home buyer should protect themselves in every way possible.
When I first became a Realtor, I quickly learned how real estate consumers can make hasty decisions either because they get cooked up in the exclusion of the process, or sadly, because they are persuaded to the point of being taken advantage of. There are common pitfalls in the real estate process, and when observed, can save people a lot of money, and a lot of grief.
Here is a list of ways that home buyers can protect themselves:
Maintain Transparency (monitor missions, etc.)
It is too common for people to be persuaded to purchase a home simply because the commission on that home is higher than those of other homes. In both new construction and resale, Realtors are targeted by sellers with incentives to bring clients to those homes. A Realtor's commission should be insignificant when helping a client find a perfect home, and by requesting that the commission of the homes be made known, you will limit the likelihood of being persuaded to make a purchase because of the Realtor's payoff.
Inspection Report Objectivity
Imagine you are a home inspector, and you pride yourself on being the most thorough inspector in town. In fact, most of your clients back out of buying the home because you bought all of the home's defects to light. Now imagine that you are the Realtor that represented the buyer. How would you feel if you were 30-60 days away from being paid thousands of dollars, but because this home inspector scared you away, you have to start the process over again.
Realtor's do have a significant influence into the manner in which the inspector reviews the home. Realtors want to close the deal, and inspectors want to repeat business. When you choose your inspector, do your research and leave your Realtor out of the decision unless you have no other choice.
Encourage Awareness of Buyer's Representation Clauses
The Texas Association of Realtors Buyer's Representation Agreement, Paragraph 11B states, "Broker will seek to obtain payment of the commission specified in Paragraph 11A first from the seller, landlord, or their agents. , Client will pay Broker the amount specified less any amounts Broker received from such persons. "
Interesting! If the seller does not pay the commission, a buyer could be liable to pay it for them. It is important to utilize the Special Provisions section to make sure you are not stuck with any undesirable payments at the end.
One of the most valuable things a potential buyer can do is talk to the neighbors before submitting an offer on a house. People typically do their home searching during the day, and for good reasons. However, it is usually at night when the environment can get a little noisier and become an annoyance to residents. Are there dogs close by that bark at night? Are there neighbors that often have loud, late night parties? Is there a train that passes by at a certain time of the day or night that you obviously would not have heard about your short visit to the home? Be sure to do your research.
Property Tax Evaluation
A property tax review is very basic, but often overlooked. It is easiest to understand property taxes if you look at the actual numbers of the taxes, and then analyze the difference. For example, let's say you are interested in a home valued at $ 200,000 and the property taxes are 3%. That year you will be liable for $ 6,000 in property taxes. Now, let's assume that there is another $ 200,000 home you love just as much in a different neighborhood, and the property taxes are 2.5%. You're responsibility is now $ 5,000. This $ 1,000 could represent a significant 6% difference in your monthly mortgage payment.
Neighborhood Safety Reviews There is an abundance of demographic information available on the Web that will analyze just about any home you could purchase. Locate this information yourself – Local crime or Sex Offender reports. Realtors are always cautious because they can not be accused of "steering" their clients to certain areas – all to avoid discrimination charges. Your safety is extremely important, so again, do your research.
For Sale by Owner Searches
Ask anyone who has sold their home FSBO if during the process they received a call from a Realtor saying something like this: "Hello. I am a Realtor and have a client that would be interested in your home. 3% if I bring this client and we make the sale? " It's not that it's bad for a Realtor to ask this, because their job is to get paid to help people buy or sell a home. What you want to avoid is not having your interests looked after. If a home that FSBO would be a perfect fit for you, then you should be encouraged to see it either the realtor gets paid or not. It is wrong to withhold this type of valuable information from a client.
Safeguard from Prospect Theory
Prospect Theory essentially states that people hate to lose more than they love to win. An example to illustrate this would be – imagine you find a $ 20 bill in a parking lot, and the emotion that would have involved with this. Alternately, imagine you drop a $ 20 bill in a parking lot and you watch it fly away. Prospect Theory states that there will be more of an emotional impact with losing your $ 20 than with finding the $ 20.
How does this apply with purchasing a home? You'd be surprised. While searching for a home, you are going to incur several costs, mainly financial and emotional. It is common to spend several weeks, months, or longer looking for a home. Once you have found a home you love and decide to put in an offer, you will invest some money in inspections and other services. Since you will have invested time and money into this house already, you will have more of a determination to go through with the contract, even if the house is not a perfect fit anymore (because you hate to lose more than you love to win ).
Be on your guard, and keep your emotions in check. You may hate to lose a couple hundred dollars now, but how are you going to feel in five years when you are not as happy with the home you purchased?
Safeguard from Relative Perceptual Contrast (Contrast Effect)
"Contrast effect is the enhancement or diminishment, relative to normal, of perception, cognition and related performance as a result of immediately previous or simultaneous exposure to a stimulus of less or greater value in the same dimension" (Wikipedia, Contrast Effect). In plain English, we make judgments and develop opinions on things based on what we are exposed to immediately before and immediately after.
For example, when we are in the process of looking at multiple homes in a day with the intent to make an offer on one of them, our opinions about the homes are relative to the other homes that we see that day. What would happen if a Realtor started the showings with a run-down home and progressively shown you nicer homes? Your excuse would build as the day goes along, and you would be in a mindset to want to make an offer. What if the Realtor started with a home out of your price range, and went down from there? When you get to your price range, you would probably not be motivated to make a purchase. Perhaps you would want to reconsider and take some time to think about it.
This is not an untested theory, but a scientifically proven psychological condition that affects all of us.
This is not an exhaustive list of every way you need to protect yourself when buying a home, but recognizing these issues are sure to alleviate some of the pitfalls and stresses that come with buying a home.