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Buying a home for the first time can be a daunting process. Finding a luxury property, winning a bidding war, and surviving escrow are not easy feats even with the best of real estate agents to guide you. One of our missions is to educate our clients about the home buying process every step of the way. The more our clients know, the better prepared they’ll be for the home buying process.
Mercer Vine’s List of Top 5 First Time Home Buying Tips
The Los Angeles luxury real estate market is becoming increasingly competitive, and it moves quickly. Although it is filled with experienced buyers, first time buyers can take steps to ensure that they will not be outbid. With everything from choosing the right agent, to getting finances together, to maintaining the right state-of-mind, Mercer Vine’s agents have compiled a list of the 5 biggest mistakes first time homeowners make and how to avoid them:
1. Choosing a Real Estate Agent You’re Not Comfortable With
Purchasing a home is the largest investment many people make in their lifetime. Therefore, it is essential that buyers trust the real estate agent who executes the transaction. Many times, buyers may feel that an agent does not have their best interests in mind when searching for listings or negotiating offers. This is often due to a lack of communication or maybe even a clashing of personalities between the buyer and agent. Before seeking out other representation, it might be better to repair the relationship with your current agent. One solution may be to open a more candid line of communication. For instance, ask the agent to explain something that seems unclear in the bidding process. Another solution could be to have an honest heart-to-heart with your agent to restate or clarify your buying expectations. Perhaps you’ve changed your mind about an area that you originally were interested in, or maybe you’re willing to change your bidding range so that you’re more competitive in the market. If efforts to communicate with your agent are not yielding progress, it may be time to move on to different representation.
2. Not Creating a Solid Offer
When deciding between offers, sellers could be more willing accept a bid from a buyer who expresses a genuine and sincere interest in their home. In his web series "Six Simple Steps to Buying a Home," real estate agent and one of Mercer Vine’s founders, Dominic Labriola, discusses writing a “love letter” to the seller. No, this isn’t an opportunity to write a Keatsian Ode to the seller’s eyes – it’s an opportunity for buyers to showcase their personalities. In the letter, Dominic says to “describe yourself and your family. Tell the seller what you really love about their house and why you think they should take your offer.” If a seller has a particularly strong emotional attachment to a property (i.e. it’s raised 8 generations of their family, or it used to belong to their favorite musician), he or she probably isn’t going to accept bids from a developer who is looking to demolish the property and start anew. At the end of the day “we’re all just people,” Dominic says, and a personal letter sent with an agent’s offer makes a bid more appealing.
3. Being Unaware of Your Credit Score
Although it’s something that we should all be aware of at all times, credit scores are often overlooked as a prime indicator of our financial health. Whether you’re merely thinking about buying, or seriously attending open houses, buyers should obtain a copy of their credit report as soon as possible. Higher scores are more likely to gain approval from mortgage lenders while lower ones might be problematic. A FICO credit score is based on 5 factors: “accounts owed, payment history, new credit, length of credit history, and credit mix.” However, low credit scores may not always be indicative of a buyer’s financial habits. With issues like identity theft and fraud, it’s incredibly easy for thieves to ruin credit scores of unknowing victims. With tools such as Credit Karma or Credit Sesame, tracking your credit score while guarding against fraud is simple. Additionally, it should be noted that every single person is legally entitled to a free credit report every year. Free credit reports can be found at AnnualCreditReport.com.
4. Failing to Get Pre-Approval
If you already know your credit score, the next step is to get pre-approval. During pre-approval, a mortgage lender determines what a buyer can afford based off of a variety of financial documents (i.e. W2s, paystubs, tax returns, etc.) that vary from lender to lender. Many real estate agents suggest getting pre-approved before even looking at prospective homes. Buyers who bid before getting pre-approved risk being outbid by others who have already been pre-approved. Additionally, early pre-approval can also help buyers only consider homes within their price range and to avoid chasing listings that are outside of their budget.
5. Not Being Emotionally Objective
Another pitfall that first time home buyers run into is not controlling their emotions when it comes to finding the perfect home. Purchasing a home is an emotional ordeal for new buyers. Large sums of money, mortgage contracts, and visions of a dream home can all mix together in buyers’ minds causing them to ignore practical details such as price and location. Keeping emotions in check is especially important during the inspection process. Just because a home has sentimental value does not mean a buyer should ignore an inspector’s red flags. On the other end of the spectrum, being too negative about a home can also be detrimental to buyers. Just because a home has a few flaws does not necessarily mean that purchasing the property will be a lost cause. Before turning away from a listing after finding flaws, buyers should take a moment to consider whether this flaw is something that can easily be repaired or if it is something more serious. If it is something more serious, buyers should consider speaking to their broker candidly. During the escrow process, it is important for buyers to disclose all of their reservations about a home so that the broker may help.
Never Be Afraid to Inquire
When it comes to buying a home, clients should be completely aware of every step in the transaction. The most successful client is the client who does their research and asks questions. Being aware of your financial standing, maintaining objectivity, and vocalizing expectations are always wise rules to follow as a client or seller.