Five Common Mistakes Real Estate Buyers Should Avoid

Deciding to buy a home or property is one of the biggest financial decisions most people make. But there are also many common pitfalls for veteran and first-time investors. Financial expert Mark Lamkin from Lamkin Wealth Management explains the five common mistakes to avoid when investing in real estate.

• Mistake 1. Lack Of Research: 

Before most individuals buy a car or a television set they compare different models, ask a lot of questions and try to determine whether what they are about to purchase is indeed worth the money. The due diligence that goes into purchasing a home should be even more rigorous.

There are also research considerations for each type of real estate investor - whether a personal homeowner, a future landlord, a flipper or a land developer. (If you're flipping houses, check out Fix It And Flip It: The Value of Remodeling, Five Mistakes That Make House Flipping A Flop and Top 5 Must-Haves For Flipping Houses.)

Not only must the prospective buyer ask a lot of questions about the home, but he or she should also inquire about the area (neighborhood) in which it is located. (After all, what good is a nice home if just around the corner is a college frat house known for its all-night keg parties? Unless of course, you're attracting a student renter.)

The following is a list of questions that would-be investors should ask regarding the home in question:

1. Is the property built in the vicinity of a commercial site, or will long-term construction be occurring in the near future?
2. Does the property reside in a flood zone or in a problematic area, such as ones known for radon or termite problems?
3. Does the house have foundation or permit "issues" that will need to be addressed?
4. What is new in the house and what must be replaced?
5. Why is the homeowner selling?
6. What did he or she pay for the home and when?
7. If you are moving into a new town, are there any problem areas in town?

• Mistake 2. Getting Lousy Financing

Though the real estate bubble in North America ostensibly popped in 2007, there are still a large number of exotic mortgage options. The purpose of these mortgages is to allow buyers to get into certain homes that they might not otherwise have been able to afford using a more conventional, 25-year mortgage agreement.

Unfortunately, many buyers who secure adjustable/variable loans or interest-only loans eventually pay the price when interest rates rise. The point is that home buyers should make sure that they have the financial flexibility to make the payments (if rates go up). Or they should have a back-up plan to convert to a more conventional fixed-rate mortgage down the line.

• Mistake 3: Doing Everything on Your Own

Many buyers think that they know it all, or that they can close a real estate transaction on their own. While they might have completed a number of deals in the past that went well, the process may not go as smoothly in a down market - and there is no one you can turn to if you want to fix an unfavorable real estate deal.

Real estate investors should tap every possible resource and befriend experts that can help them make the right purchase. A list of the potential experts should, at a minimum include a savvy real estate agent, a competent home inspector, a handyman, a good attorney and an insurance representative. These experts should be capable enough to alert the investor to any flaws in the home or neighborhood. Or, in the case of an attorney, he or she may be able to alert the home buyer to any defects in the title or easements that could come back to haunt them down the line.

• Mistake 4: Overpaying

This issue is somewhat tied into the point about doing research. Searching for the right home can be a time-consuming and frustrating process. And when a prospective buyer finally finds a house that actually meets his or her needs/wants, the buyer is naturally anxious to have the seller accept the bid.

The problem with being anxious is that anxious buyers tend to overbid on properties. Overbidding on a house can have a waterfall effect of problems. Buyers may end up overextending themselves and taking on too much debt, creating higher payments than they can afford.; as a result, it may take years for the home buyer to recoup this investment.

Are You Overpaying? To find out whether your dream investment has a high price tag, start by searching what other similar homes in the area have sold for in recent months. Any real estate broker should be able to provide this information with relative ease (particularly with their access to a multiple listing real estate agent database). But as a fallback, or if you are not using a realtor's services, simply look at comparable homes in the local newspaper, and see what they are being offered for. Logic should dictate that unless the home has unique characteristics that are likely to enhance its value over time, the buyer should try to keep any bids consistent with other home sales in the neighborhood.

Buyers should realize that there are always other opportunities out there, and that even if the negotiation process becomes bogged down or fails, the odds are in their favor that there is another home out there that will meet their needs. It's just a matter of being patient in the searching process.

• Mistake 5: Underestimating Expenses

Every homeowner can attest to the fact that there is way more to owning a house than just making the mortgage payment. Unlike renting, there are maintenance expenses that go along with mowing the lawn, painting the shed and tending the garden. Then there are the costs associated with furnishing the house and keeping all of the appliances (such as the oven, washer/dryer, refrigerator and the furnace) running, not to mention the cost of installing a new roof, making structural changes to the house, or other little things like insurance and property taxes.

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Ten Tips Toward a Quality Offer on a Home

For an agent to display an offer to purchase can be very telling, because that form is one to become very familiar with, before you are even close to signing one.

It is a positive sign when an agent educates you. That form can be stressful and scary, or it can be exciting and satisfying. The difference is what you know about how you got to this point and making wise choices; choices based on facts and emotional restraint.

Unfortunately, "fear of loss" is one of the reasons buyers choose a home. There will be another home coming along if you are not successful on one.

To become comfortable with the form before you get involved with the details of signing an offer is a good example of "what you know."

Do not wait until an agent is asking you to sign this document to read it for the first time. Ask an agent you interview to provide a copy of the "offer to purchase" form so you can prepare for the time to negotiate, then reserve a time to read it.

Have a notepad to write questions down about the purpose of certain clauses or when the meaning is not clear.

Read every document in advance of signing in a real estate transaction. Technology has made it convenient to share documents electronically.

While completing documents at the kitchen table or the hood of a car can be very convenient, today there is no reason for not reading them in advance.

We are all accustomed to agreeing to "terms of use" without reading them when we sign into websites, but it is much more personal and perilous when buying and selling real estate.

Ask questions you have by using email. There are a number of reasons for this approach:

• You and the agent can dialogue when it is convenient for both of you.
• You gain time to consider implications in the document's words before you sign it.
• Writing questions down and answering them in writing commits each party to communicate clearly.
• It is more memorable than conversation.
• It is easy to store the information for future reference.

There is an old far-Eastern proverb that will help you apply this practice to your process, "The strongest memory is no match for the weakest ink."

Remember that your offer becomes a contract of sale when accepted as written. You do not want to leave any question unanswered unless you have protection with a well-written contingency.

Understanding the language and reviewing the offer beforehand should help reduce last-minute concerns and surprises. Here are just a few of many important subjects:

• Agency disclosure
• The proposed price
• Contingencies
• What personal property or fixtures is included, or not, in the sale
• Deadlines
• Penalties
• Representations of known defects
• Can the buyer force the closing when the seller reneges? Can the seller sue for specific performance if the buyer fails to close?
• What if there is a fire?

When you are selecting an agent to help you find your home, observe how the agent reacts to your question about providing documents in advance.

If they see part of their job is to prepare you for what is to come, they may be a good choice.

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Six Real Estate Mistakes That Can Cost You

In real estate transactions, the stakes are high and even a small mistake can end up costing you thousands of dollars. Whether you’re looking to buy or sell, here are some common mistakes to watch out for. 

1. Not Getting the Price Right: One of the toughest pieces of any real estate puzzle is setting the right price. If you price it too low, you potentially leave money on the table. Price it too high, and it will sit on the market for too long, causing buyers to will wait until you’re desperate and then make you a cut-rate offer. The mistake many sellers make is to simply look around at the price of other homes in the neighborhood without thinking carefully about whether those home are comparable. So if you’re in the market to sell, your first step should be to hire a home appraiser. It might cost a few hundred dollars, but it’s an expense that can save you thousands down the road.
2. Not Fixing It Up: While hurrying through the process of selling a home, many sellers fail to take care of all of the little things, like a door that’s coming off the hinges, an overgrown backyard, or a chipped and peeling paint job. While these problems might seem minor, they add up and can cause buyers to view your home more as a fixer-upper than a dream home. Before you put it on the market, spend a few weekends making sure your home is looking its best.
3. Hiding Problems From the Buyer: Some sellers think they can conveniently “forget” to disclose problems to a buyer. While a buyer might not discover the problems during the inspection or walk-through, they are bound to eventually. And if those problems are severe enough, you could be in for some costly litigation. Don’t try to pull a fast one on buyers. Make sure they are informed in writing about any issues so that there is no cause for dispute after the sale goes through.
4. Wrecking Your Credit At the Last Minute: The home-buying process can be long and drawn out, which provides ample time for buyers to make some big financial mistakes. Many buyers fail to realize that a pre-approval is not a guarantee that you will land a loan. If you do something to change your credit status during that time — such as buying a new car, or missing a few credit card payments — the pre-approval numbers you were quoted can disappear in an instant. The bank might stick you with a higher interest rate, or lower the total loan amount, jeopardizing your chances of landing your dream home.
5. Getting Into a Bidding War: During a heated bidding war, emotions run high, which can cost you dearly. If you have your heart set on a house and want to go above the asking price, make sure you have someone to do the negotiating for you. Many novice buyers, looking to save a few bucks, will venture into the housing market without a buyer’s agent at their side. But a good buyer’s agent will be an advocate on your behalf and will be a shrewd negotiator  during the process.
6. Not Taking the Inspection Seriously: Most lenders will insist on a inspection before they sign off on the deal to ensure that the home isn’t about to collapse in on itself. Unfortunately, buyers often treat this as just another step in the process and fail to take advantage of the inspection. Follow along with the inspector and take detailed notes to get a sense of potential problems. Armed with information about a home’s faults, you can use the inspection as leverage to drive down the price.

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Tips for a Quick House Sale

As natural as the impulse might seem, try not to panic. You’re still in control of your house-selling destiny. You have options that will promote interest in your home and preserve your sanity.

The three most important factors when selling your home are marketing, presentation, and price. Let’s start with the last one, because that’s where the majority of people make the most mistakes in a hot market like ours.

Positive stats might tempt you to shoot for the moon, but you must keep your list price in line with your comparable market analysis recommendation. Those comparables — similar homes that have sold recently, in your neighbourhood — don’t lie. They’re the most accurate bellwether for what the market will bear.

If you haven’t had more than a couple of showings over a two-week stretch, you might want to consider lowering your list price.

(Keep in mind that the average time to sell in Edmonton is about 49 days, according to the Edmonton Real Estate Board; if your home has been on the market for less than a month-and-a-half, you can afford to be patient before moving to a price cut.)

Perhaps you factored in some top-line renovations into your list price — a granite countertop here, stainless steel appliances there. Proceed carefully. Buyers aren’t necessarily itching to honour the complete cost of that work, let alone eat up additional costs just so that you can pocket a profit. Sellers CAN make money fixing and flipping, but it’s not as easy as HGTV leads you to believe (more on that next month).

If you feel your price is solid and you’re still not getting any action, move on to marketing.

Too many A-list homes squander potential viewings and exposure because the photos are strictly B-list. Fuzzy, cluttered, poorly composed shots don’t make your home jump off the page. You’re in a competitive marketplace, with customers who have a lot of options and not a lot of time to consider them. Get professional photos.

Then, move on to the balance between open houses and private showings. Open houses can be very effective at generating interest, particularly after a price reduction, but they can also be a time-waster.

The key is to treat open houses like a business project: maximize efficiency and get the most bang for your time. Don’t spend all day smiling in your foyer. Two hours on a Sunday? Perfect. Too many people let their open houses rule their weekends.

The opposite holds for the private-viewing appointment. Within reason, you have to be willing to move heaven and Earth to make these happen. Buyers can be fickle; if they’re on a six-house viewing binge and they can’t fit yours in, there’s a good chance they’re gone forever. Unless there’s a can’t-miss element in your home that you’ve managed to convey in the listing, busy buyers are going to err on the side of convenience.

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The Tales of a Long Commute Back Home

Whether you are moving to a new apartment or starting out again at a new office, the commute you take everyday is an element of the new chapter in your life that is hard to overlook.

Your commute to your new address or to your new office definitely has its own set of pros and cons to your daily routine. In a nutshell, the commute you take can either be a strain or a benefit to your overall well being. Let's take a look at how that happens.

It is natural to be confronted with different kinds of hassles in a day, and commuting usually takes the cake. Traffic, pollution, the noise and the fear of being reprimanded because you are late are natural offshoots of a long, annoying and irritating commute. These risks of a long commute are hard to control, hence it can heighten stress levels of the roof. 

Add to that the physical stress a long commute brings to the body such as neck pain, back pain and overall fatigue. Hence, if you happen to have a work mate who reports late to work most of the time, he or she is likely to report bouts of physical stress as well.

However, it is interesting to note that there is also a handful of benefits from a long commute.

Especially for those who take public transport to get to where they need to be, freeing their hands from the steering wheel of their car can provide them more options and time for any kind of preparation or relaxation they want before working. 

They can read the morning paper, check and answer their emails, play games on their phone, fix their tie or their laces, or even sneak in a quick breakfast if they can. If the commute from the house to work lasts for an hour, that means you have one full hour to prepare yourself for what lies ahead in your day. 

Commuting by driving can also be a good opportunity for same major catch up with yourself. As you stand by the wheel of your car, you can listen to the morning news on the radio, belt out some of your favorite tunes to beat the traffic and simply cherish some me-time that you won't have if you are taking the subway or the cab to get to work or any place you need to be for the day. 

At the end of the day, the choice is always yours whether to make something good out of a long commute or lament it by succumbing to stress or road rage. Just as there are many options to address a long commute, there are also as many options out there to beat it and how to make a more favorable commuting arrangement on your end.

If you cannot tolerate a long commute from your house to work, then look for a place that is near your workplace. Rent out an apartment for a short-term arrangement or go full out for a new property if you plan to stay in your current job for the long haul. At this point, it helps to seek the services of a real estate agent who can present to you as many options as possible to give you the best and most favorable living arrangement given your circumstance.

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