We sat down with Craig Shumway, a realtor in Gilbert, Arizona to ask him about some common mistakes that people make when buying a home. Review these mistakes and you’ll be better prepared when you go to purchase your home.
Below is a transcript of our interview.
Mistake #1 – Doing It Alone
Mistake number one. What should we avoid?
Mistake number one is going in alone. And here’s why this is a mistake. You might think, hey, there’s a brand new build, I’m just going to go to the builders little sales warehouse. I’m going to look at their options. I’m just going to do it by myself. It’s fine. Or hey, I’m just going to call the listing agent. You know what? We’ll cut the other agent out. I won’t be represented. I’m going to do this alone.
Well, here’s the thing. It doesn’t change the price for you. All the commission is already baked into the price.
You won’t get a cheaper deal on the new build. You won’t get a cheaper deal on the home represented by the agent. That agent’s just thinking, “oh sweet, now I get to represent both sides. I get 6% instead of 3%”.
And guess what you end up with? No representation. And without any representation, you have nobody on your side. You got nobody fighting to get you the best deal on the home because the listing agent’s job and the legal responsibility of the sales agent and the new build is to represent the seller. So that’s the first mistake you can make, it’s going at it alone.
Mistake #2 – Not Understanding The Market
Number two, which is very similar to number one, it’s not understanding the market. And what I mean by that is when you go into negotiations, if you’re for example in a seller’s market and you’re thinking, oh, well, these guys have priced their home high. You’re going to go in and think I’m going to give them a low ball.
And then all of a sudden you find out that they have 14 other offers and you’re like, well, let’s just see if they’ll take it.
Guess what? When they have 14 other offers on the table and you’ve low-balled them, they’re not even looking at your offer. So that’s mistake number two. It’s just not understanding the market that you’re in and to understand it, you need somebody that’s in this day in and day out. Because how often do you buy a house?
Mistake #3 – Treating Them As The Enemy
Mistake number three comes on the side of the negotiation and it’s treating the other side as the enemy.
In any good negotiation, if you go in thinking, “hey, these people here to screw me over so I’m going to screw them over”
It makes things 10 times more difficult than it needs to be. Look, everybody already knows, a buyer wants to pay the least amount of money possible for a home.
A seller wants to make the most amount of money possible for their home. That’s already given. So when you go in saying, hey, I’m going to screw these guys over, you end up usually screwing yourself over.
I’ve had deals almost fall apart over a $60 doorknob.
Where the client was just so fed up and they’re like, no, we’re going to win this. We’re not paying for this doorknob. And the seller was like, that was the doorknob on the home when we walked in, we should have that. It was an easy solution. I went and bought a new doorknob. But when you get to that point, it’s usually just an emotional response and that’s why it can end up making things more difficult than they need to be.
Mistake #4 – Not Being Emotionally Prepared
So number four would be not being emotionally prepared.
There was a survey done by homes.com back in 2018 that said about 30% of people going through the home buying process, shed tears.
So don’t be surprised if you cry at some point during this process, it is one of the most stressful moments in a person’s life. Because not only are you spending a lot of money, but you’re looking at where is my family going to be?
And the other thing is homes aren’t perfect even if you get a brand new home, there are projects and things that have to be done. Like when you buy a car, do you have to do regular maintenance?
Absolutely. Well, it’s the same thing with a home, except for now you have a lot of items that need regular maintenance.
You have your appliances, your AC units. You got to maintain on the painting. You got to maintain the landscaping. There’s a lot to do when you own a home. A lot of responsibility.
And so no home will be perfect when you move in and there’s a lot of stress going on with just moving your entire life.
And so be prepared emotionally, because it’ll make for a better experience, don’t get wrapped up in a home that you don’t have under contract yet. Don’t get super excited or depressed or worried about the inspection report. You can work through all these things, but it takes time and it takes patience and it takes emotional maturity to go through it level headed.
Mistake #5 – Not Being Financially Prepared
Number five, I’m saving the best for last, it is when you’re going into looking at a home without being final financially prepared.
And here’s what I mean by this. Obviously, people look at the interest rate on the loan. How much am I going to be paying a month?
What is my down payment going to be?
Most people understand those costs, right?
So they’re like, okay if I can get into a home 3% down, that means if I’m behind a $200,000 home, I just need 6,000 bucks. Oh dude, I got 6,000 bucks in the bank so let’s go. But what you’re forgetting is all of the other expenses that go into buying a home. Right. You have your closing costs.
Which adds another two to 3%.
You have you’re moving costs.
Do you need to hire movers? Do you need to buy new furniture? Do you need to do whatever you got to do to prepare your family? How many times are you going to go out and buy pizza, right?
So there’s all of these other costs that go in. Do you have money set aside for inspection? Do you have money set aside to get your homeowner’s insurance? Do you have all of those things in place? So typically what I tell people is on the minimum you need to have at least 5% saved up of the purchase price of the home.
But that’s the minimum.
If you want to be safe and feel financially a little bit better, you need to be looking more towards that 20 to 25%.
Now, that’s not going to be possible for everybody and it’s not always the right thing to do, but you need to be prepared with the cost and understand what’s going on and then the most important thing is before you even go looking at a home, get a pre-qualification from a good lender.
That lender will help you look through your finances. They’re going to look at your credit score, your debt to income ratio. They’re going to help you determine the monthly prepayment. So that way you’re prepared. So by the time you’re out looking at a home, you’ll know if you can make it work or not.
Now, you guys know those are the five mistakes to try to avoid when purchasing a new home. But really if we just go back to mistake number one of not hiring representation, a lot of those issues will be taken care of. So don’t try to do it alone. Find a realtor, find an awesome realtor. If you’re here in Arizona, find Craig, he’ll help you.