Potential pitfalls to avoid in the buying process
(Original Article – https://www.loveproperty.com/gallerylist/123873/expensive-mistakes-people-make-when-buying-a-home)
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House-hunting is fun – if sometimes stressful – and when you get it right it’s exhilarating. But one thing we can all agree on is that buying a house is an expensive business. Nobody wants to waste money during the process but unfortunately, many of us fall into that trap. From buying a money pit to unforeseen expenses, here are some of the most common costly mistakes people make while house-hunting…
Not negotiating the price
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Many people leave money on the table by simply failing to negotiate. Whether they’re worried about offending the buyer or concerned about being outbid, some buyers offer the asking price without even thinking about it. But this could be an expensive mistake. Your house is likely to be the biggest purchase you ever make, which means shaving even 1% off the asking price will represent a huge saving. Do your research and consider putting in an offer. What’s the worse that could happen?
Not putting in an early low offer
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Well, it is possible you could offend your buyers – but that’s only a concern if you make a ridiculously low offer. Be guided by the real estate agent, who will know the circumstances of the sale and whether or not the sellers are in the position to take a low offer. In some circumstances – like if the house is particularly tricky to sell or the sellers are going through a divorce – they might bite your hand off.
Skipping the survey
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In the UK, once you’ve had an offer accepted, you should get a survey completed by a qualified surveyor, who will look at the property’s condition and highlight any potential problems. While most lenders will require a survey or inspection, it’s worth doing anyway as they will uncover any major issues and stop you from getting saddled with a money pit.
Being scared to commit early on
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When it’s time to go house-hunting, we expect it will take a while. So, when the perfect house comes along after a week or two, it can feel too good to be true but it’s important to trust your instincts. If a property is right for you, don’t hang back because of worries that there might be something better out there for you. There are sad cases where people have overlooked their dream house early on and spent years trying to find something comparable, only to discover that the market has moved on.
Holding out for the perfect home
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On that note, you don’t want to be too picky. Rarely will anyone find a truly perfect home that ticks every single box on their wish list. It’s worth having an idea of your non-negotiables, like school district proximity or a garden, but be open-minded about the rest. In many cases, there’ll be a workaround anyway. Bad décor can be updated, power showers can be installed and awkward living spaces can be reconfigured.
Only looking online
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In a world of technology, it’s understandable that the first thing many buyers do is log onto Rightmove or Zillow every morning. But if you’re doing that and not having much luck, it could be time to go old school. In a hot property market, many listings get snapped up before they even make it online. So, get to know your local estate agents and ask to be put on their mailing lists. You could even go a step further and pop letters of interest through the houses you’re particularly keen on.
Buying a fixer-upper
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Chip and Joanna Gaines have a lot to answer for! While purchasing a fixer-upper can be a smart move if you’ve got the skills, it can also be a financially ruinous move. In the UK, many jobs need to be carried out and signed off by professionals in order to meet building regulations and codes. Taking on too much of a project can end up costing a lot of money and many people who hope to make a quick buck end up losing out.
Looking at only perfect properties
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On the other hand, you could be holding yourself back by only looking at properties that are already renovated with décor to suit your taste already in place. While a full-on renovation job might not be for everyone, a house in need of a little TLC isn’t beyond the scope of most people. By only considering picture-perfect properties, you’ll discount a whole portfolio of homes that could be the ideal match for your lifestyle and cheaper to buy.
Focusing on the finishes
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We get it. A herringbone floor, marble countertops and converted gym room are all very exciting. But these are the cherry on top and you should try not to get entirely seduced by them. More important factors, like location and layout, should take precedence, as getting these wrong will cost you more in the long term. Plus, you can always add the flourishes once you get the keys.
Not being registered to vote
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In the UK, one of the quickest ways for a lender to check your identity is to see you’re on the electoral roll. If you’re not on there, your application will likely take longer, which could mean you miss out on a steal of an interest rate. It might also negatively impact your credit score. Not registered? It’s easy, quick and free to do so at gov.uk.
Not improving a bad credit score
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Speaking of your credit score, you’ll want to make sure yours is looking shipshape before you start delving into the world of mortgages. Unfortunately, if you apply with a bad credit score, you may get rejected, which will further worsen your credit score and limit your options down the line. Instead, get your ducks in a row by checking your current score and addressing any errors that might be standing between you and your dream pad as early as you can. It could take a year or more to build it back up.
Underestimating overall costs
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First-time buyers are especially guilty of this one; it’s understandable, as just getting together a deposit is challenge enough. But unfortunately, there are a few more costs you’ll need to take into account, and failing to do so may stall the house-buying process and result in you having to make some expensive decisions (such as taking out a loan to cover the unforeseen costs). Some of the major costs include house surveys or inspections, conveyancing fees and insurance.
Not using a mortgage broker
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Are mortgage brokers worth the money? Mortgages are a minefield. Your choice is to trawl through the options yourself or outsource all that hard work to someone else. While it sounds counterproductive to suggest you’ll save money by hiring someone, you’ll save time and get access to more products, meaning you could end up saving money in the long term with a lower interest rate and avoiding any pitfalls thanks to their years of experience. They can also sometimes offer deals or bundles on other products such as insurance.
Using the wrong solicitor
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Legal fees can stack up quickly when moving homes, so it’s worth keeping them down wherever you can. Most lenders will recommend a solicitor for you to use, but it isn’t always worth going with their option. In many cases they won’t be local to you, meaning all communication will be done over email or the phone, which can lead to delays. Whatever you do, make sure that your solicitor is on the approved panel for your mortgage lenders, otherwise you’ll have to pay extra to have them instructed.
Being confused about leasehold and freehold
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It’s worth clarifying whether you’re buying a leasehold or freehold property before you sign anything, as there are big financial ramifications. Leasehold properties give you the right to live in them for a set period of time, but you won’t own it and you’ll need permission from the freeholder to make alterations. You may also be subject to ground rent and other service charges. If you buy freehold, you own the property and the land and can do what you like with it (within reason)!
Getting the wrong mortgage
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A mortgage agreement document is a boring thing. Nobody is denying that. But it is well worth combing through in full so you don’t get any nasty surprises down the line. For example, most people won’t want to sign up to an interest-only mortgage. While you’ll be paying lower monthly payments, you won’t be paying anything against the principal of your mortgage, so you will never actually own the property.
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It is tempting to buy at the top end of your budget. You can, after all, technically afford it. But it’s worth stress-testing your salaries to see if you can still afford it in the event of a job loss or a hike in interest rates. A monthly repayment of £1,000 might be affordable, but if you interest rate is hiked from 1.5% to 5.5%, you’ll be paying a third more at £1,535.
Ignoring your head for your heart
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Perhaps it’s a traditional craftsman with a porch or a city skyline view from a loft apartment, but certain features are bound to seduce the buyer. Whatever it is, try not to let your heart overrule your head. Buying a house based on emotion could cost you if the lifestyle it affords you doesn’t match up with your expectations. While you shouldn’t discount your emotions, you should weigh them up against your list of agreed priorities. It doesn’t matter how good the view is if it’s in a bad spot and the roof needs replacing.
Putting down a small deposit
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If you can get away with a smaller deposit, you might be tempted to keep the extra. But over time, that decision will cost you money. Generally speaking, the higher your deposit, the better interest rates you’ll get. You can also afford to bring down your mortgage to a shorter term and get it paid off quicker.
Not thinking about your next step
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Buying and selling homes is expensive, so to save money you don’t want to do it more often than is strictly necessary. You can help limit the number of times you do it by anticipating your next moves, at least in the mid-term. We’re not saying you need to buy a place that will suit you in retirement, but a couple in their 30s who would one day soon like children and a pet dog might consider a starter home, rather than an apartment which will likely not last them as long.
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2021 was a hot market with buyers regularly losing out if they waited around. So, while it is tempting to rush to put an offer in, it isn’t always the best move. At the very least, you should take a night to digest the viewing and sleep on it. In the morning you should wake up with a clearer idea of how you want to proceed. While it may mean you could miss out on certain houses, it will stop you committing to a house that isn’t right for you.
Compromising (too much)
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Once you’ve been searching for a while, you might feel drawn to offer on a house that isn’t right for you. And while we’re all for making compromises, you don’t want to buy a house that is full of them. Moving into the wrong house is an expensive mistake to make. Instead, if you’ve been searching for a while and nothing is coming up, perhaps it is time to rethink. Is there a cheaper area you could look at? Could you look at smaller properties with the view to extending down the line?
Not checking building regulations approval
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In the UK, if the property you are interested in has had building works carried out – such as a new extension – and the previous owners had not got the necessary Building Control consent, you may be at risk of invalidating your insurance. That’s because the insurance company may refuse to pay out without the appropriate paperwork. On top of that, you may also want to pay to have the shoddy work bought up to standard, which is an additional cost.
Buying a nonstandard property
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Some properties are not as easy as others to get a mortgage on. Certain lenders aren’t keen on lending on commercial buildings or flats above a shop. This is because, from the lenders’ point of view, they are at a bigger risk of issues outside the owners’ controls, such as security breaches. Likewise, lenders often won’t lend as much on new builds, to protect themselves against the property losing value or stalling in the first couple of years.
Not thinking about the resale
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Most house-hunters get swept up in the search and forget that, in all likelihood, they’ll probably sell their home at some point. So, it’s worth taking into account how easy the house will be to shift in the future, should you want to move or downsize. One of the biggest factors here will be the location. Is it a popular spot for buyers? If so, selling it should be easy.
Not considering the neighbourhood
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If you’re moving across to a new part of the country, you’ll want to spend extra time making sure you get to know the area first. Moving to a new-to-you neighbourhood and finding out you don’t like it is a costly mistake, as we all know moving is an expensive process. Before you sign anything, make sure you check out the area in the day and at night, ask locals what they think and research what house prices have been doing in the area.