rational decision possible.
There are eight common emotional mistakes that people make when buying a home. Avoiding these pitfalls will help you find the best home-sweet-home.
Mistake 1: Falling in Love With a House You Can’t Afford
Once you’ve fallen in love with a particular home, it’s hard to go back. You start dreaming about how great your life would be if you had all the wonderful things it offered – the lovely, tree-lined streets, the jetted bathtub, the spacious kitchen with professional-grade appliances. However, if you can’t or won’t be able to afford that house, you’re just hurting yourself by
streetimagining yourself in it. To avoid the temptation to get in over your head financially, or the disappointment of feeling like you’re settling for less than you deserve, it’s best to only look at homes in your price range. Start your search at the low end of your price range -if what you find there satisfies you, there’s no need to go higher. Remember, when you buy another $10,000 worth of house, you’re not just paying an extra $10,000 – you’re paying an extra $10,000 plus interest, which might come out to double that amount or more over the life of your loan. You may be better off putting that money toward another purpose.
Mistake 2: Assuming There’s Nothing Better Out There
Unless you are a high-end buyer looking at custom homes, chances are that for any home you find that you like, there are quite a few others that are nearly identical to it. Most neighbourhoods have multiple homes that are the same model. Further, most neighbourhoods are full of homes that were all constructed by the same builder, so even if you can’t find an identical model
for sale, you can probably find a house with many of the same features. If you’re considering a condo or townhouse, the odds are also in your favour.
Even when you have a long list of must-haves, there are probably several homes out there that can meet your needs. If there are snags with the home you’ve decided you like – such as major repair issues, an inflexible asking price or a difficult possession date – consider moving on. Being open to keep looking will save you from making rash decisions you might regret later.
Mistake 3: Being Desperate
When you’ve been looking for a while and you’re not seeing anything you like – or worse, you’re getting outbid on the houses you do want – it’s easy to get desperate to get into your new house now. However, if you move into a house you’ll end up
hating, the transaction costs to get rid of it will be costly. You’ll have to pay an agent’s commission (up to 5-6% of the sale price) and you’ll have to pay closing costs for the mortgage on your new house. You’ll also deal with the hassle and expense of moving yet again. If you decide not to move but to try to make the best of what you have, remember that alterations and renovations are expensive, time-consuming and stressful. If you have time on your side, it’s OK to wait until something that suits you comes along – as long as your demands are realistic for your budget, you are bound to find something you live with.
Mistake 4: Overlooking Important Flaws
For any of the three reasons we just discussed, you might be tempted to ignore major problems with the house that will be difficult, expensive or impossible to change. Carefully consider your options before you make a commitment, and
consider waiting until something better comes along. New houses come on the market every day.
Mistake 5: Overestimating Your Handyman Skills
Don’t buy a fixer-upper that’s more than you can handle in terms of time, money or ability. For example, if you think you can do the work
yourself then realize you can’t once you get started, any repairs or upgrades you were planning to make will probably cost twice as much once you factor in the labour – and that may not be in your budget. Not to mention the costs involved to fix anything you may have started and the fees to replace the materials you wasted. Honestly evaluate your abilities, your budget and how soon you need to move before purchasing a property that isn’t move-in ready.
Mistake 6: Rushing to Put In an Offer
In a hot market, it may be necessary to pull the trigger very quickly if you find a home you like. However, you have to balance the need to make a quick decision with the need to make sure the home will be right for you. Don’t neglect important
steps like making sure the neighbourhood feels safe at night as well as during the day and investigating possible noise issues like a nearby train. Ideally, you’ll be able to take at least a night to sleep on the decision. How well you sleep that night and how you feel about the home in the morning will tell you a lot about whether the decision you’re about to make is the right one. Taking the time to consider the decision also gives you a chance to research how much the property is really worth and offer an appropriate price.
Mistake 7: Dragging Your Feet
It’s a tough balancing act to make sure you make a careful decision, but don’t take too long to make it. Losing out on a property that you were almost ready to make an offer on because someone beat you to it can be heartbreaking. It can also have
economic consequences. Let’s say you are self-employed. Perhaps for you more than anyone else, time is money. The more time and energy you have to take out of your normal activities to search for a house, the less time and energy you
have available to work. Not dragging out the homebuying process unnecessarily may be the best thing for your business, and the continued success of your business will be essential to paying the mortgage. If you don’t pull the trigger quickly, someone else might, and you’ll have to keep looking. Don’t underestimate how time-consuming and routine-disrupting house shopping can be.
Mistake 8: Offering Too Much
If there’s a lot of competition in your market and you find a place you really like, it’s all too easy to get sucked into a bidding war – or to try to pre-empt a bidding war by offering a high price in the first place. There are a couple of potential
problems with this. First, if the house doesn’t appraise at or above the amount of your offer, the bank won’t give you the loan unless the seller reduces the price or you pay cash for the difference. If this happens, the shortfall on your bid as opposed to your mortgage will have to be paid out of pocket. Second, when you go to sell the house, if market conditions are similar to or worse than they were when you purchased, you may find yourself upside down on the mortgage and unable to sell. Make sure the purchase price for the home you buy is reasonable for both the house and the location by examining comparable sales and getting your agent’s opinion before making an offer.
Conclusion
It’s natural for emotion to come into play in the home-buying process. Buying a house is a big decision, but this is exactly why you need to ensure you are making rational choices, rather than getting wrapped up in the notion of a dream home. Slow down, overcome your emotions and, ultimately, make a home-purchase decision that’s good for both your feelings and your finances.
As a second time buyer and first time home buyer this is a great article. Thanks so much for that.
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“Overestimating Your Handyman Skills”
that’s a real good advice. My sister has bought a house and her husband saw himself as a great handyman. Well… He’s back on hearht now
I think over estimating your handyman skills is a mistake every makes once, and only once. I tried to fix some plumbing one time and I tried a week before I called in an expert.
You are very correct …. that TV Show “LOVE IT OR LIST IT” is quite entertaining, as it addresses home renos and what you can get for your money. Also exposes all the “hidden issues” literally “hidden” when you rip out walls, ceilings and floors.
I was really lucky to have avoided most of these mistakes when buying my house. I did maybe take a little too much time to put in an offer. I was nervous, really nervous about buying my first house. So I was slow in putting in my offer. Luckily, it worked out! After a few weeks of torture.
LOL torture can be a good thing …. home ownership always trumps renting as an investment as long as you did your “due diligence” with a home inspection prior to purchase to be sure that there are no “surprizes” eating up your potential profits.
Wow. This entire article sounds like something, that will become extremely important and is of use. My partner and I were looking at mansions, that we would like to purchase. He really wants a large scale house, but I prefer something large and cozy. You are correct in slowing people like us down, when it comes to looking at something that we can’t afford so early in the game. I find that this is the reason why there are many foreclosures. I would like our first homebuying experience to be hopefully something I can pay in full for!
LOL having bought – renovated – sold many a homes …. mansions will offer a whole new series of “fun” discoveries for you two!!!! LOL
There is a TV show called “LOVE IT OR LIST IT” that is absolutely a “must see” for anyone who is buying, selling, flipping or just interested in real estate that is just too funny …. yet ACCURATE! LOL
This is definitely a great list with a lot of great things to consider when purchasing a home. A lot of people forget that you are in it for the long haul; it is a marathon not a sprint. Take your time to make a decision that will feel good in 50 years, not just now.
Good observation …. it is also the biggest investment that you will probably make in your life!
I can relate to #1. We fell in love with a house we couldn’t afford. Thankfully, we went back to square one in our search and found something we loved AND could afford. Hopefully, we learned our lesson! Thanks for a great article and great reminders!
One of the things I have frequently seen people focus on time and time again is paint colors. One tip I would give home buyers is that changing the paint colors is one of the easiest changes you can make, so don’t let it be your focus when looking at a house.
I remember when I was looking for a home about 2 years ago. The biggest mistake I could have made was buying a home for cosmetic purposes. I looked at this one home that had been recently done over, meaning pretty to the eyes. Once I had the home inspected I found that the home had so many problems. It would have cost me tons just to have the home functioning. I am glad I went throught that. It allowed me to open my eyes to my current home which was not cosmeticaly up to date, although it has great bones. Since the purchase of my home 2yr ago I have been able to update it how I like while still being able to live in it.
Do these tips apply, if i’m considering buying a home to flip it.
My plan is to buy a home, keep it for a while until a buyer comes and offer me a higher price and i can make some profit
Hmmmmm it has been my experience that most “1st Time Buyers” tend to get very emotional with the purchase process! Especially being exposed to the fervour of the Toronto market the past twelve years with the multiple bidding insanity!!
As i have suggested many times, this will be the largest “investment” the average consumer will undertake. In my opinion, it is imperative to employ the services of a full time, professional real estate agent to competently assist you through the process!!
Emotion plays into the equation obviously but a logical – informed decision is paramount in the end!!
Just saying….
Definitely, we need to bear in mind that the decision is a cognitive process. It is not an emotional instinct. We usually see sense of comfort as a guarantee that you are making a good choice. There are still advantages and disadvantages we need to weigh and evaluate.
Great points. It’s understandable how we can forget about patience, when dying to purchase a first or new home. But it’s just too important to be patient.
You are right …. my experience is that, especially with 1st time home buyers, emotion seems to cloud the pragmatic decision process associated with this huge investment which they are undertaking.
These are good advice. One has to be really dedicated in looking for a house and patient. I do not own a house but I have rented some and it surprises me sometime when I find a house that are cheaper by community standard, but is better than the other houses I have seen.
A big mistake we made when we first started looking at houses was thinking that we always had to low offer (to an insulting extent) on the first offer. I agree that you should negotiate, but a close friend told us to always offer 20 percent less. After purchasing three different properties, I can assure you that rule has never worked for us.
LOL i just had that conversation with a couple today ….
The 1st home downtown in the Junction area which i viewed with my new client (a referral) interestingly enough!!
=
It is like playing darts …. if you throw a dart at the dart board and miss the board entirely …. nothing is accomplished!!
Both the Buyer and the Seller are shooting for the bulls eye …. the agents role is to get them as close as possible to meet at a mutually agreed upon price!!
As a buyer, you should always remind yourself not to be desperate. There are lots of properties in the market. You will never run out of options. Never settle for just about anything.
Mistake 1 – check
Mistake 2 – check
Mistake 5 – check
Mistake 6 – check
It sometimes takes time to realize past mistakes in order to prevent them from occurring again. When we look for our new home I will take my time, unlike last time. Thanks for the great article!
Some days I think I might have overestimated my handy-man skills… But other days, I’m up for the challenge. I guess one of the great things for me is that I’ve got everything in my house in liveable working order now. So while there is more handy-manning to do, it’s not urgent.
Next project: sand, stain and seal my log-cabin.
Mistake 1: Falling in Love With a House You Can’t Afford
I think that if you this first mistake almost all the mistake come as normal steps afterwards. You become desperate after the house, don’t see some important issues or flaws the house has and end up by paying more than you initially thought you ever would.
Great article !
My experience has been that establishing a Buyer’s price “comfort zone” in the home – condo search is the foundation of the process!
Professional agents will then guide their clients through neighbourhoods and product that is affordable.
This keeps the anxiety levels lower and the results higher.
My husband and I just bought our first house at the end of December. We managed avoid most of these mistakes! The house we ended up with did end up being a bit more than we wanted to spend, but we bought it from one of my husband’s coworkers who gave us a lot of help with closing costs, and it’s a house we’ll be very happy in for quite a few years. His comment to us was that when they bought it, the house was a bit outside their budget as well. However, the company that they work for is great about raises and such, so we know that will be coming and that’ll make things easier!
I’m definitely going to keep these things in mind when we eventually buy a new house, since this one was a bit of a weird sale since we knew the owner and did almost all of the negotiating face-to-face.
Excellent points. If you have taken your time and found the home you really want, make the offer and don’t take unnecessary time getting the contracts signed and back to your agent. I once had a couple who loved the house I showed them, did not make a full price offer, but their offer was accepted. But I told them to get the contract back as soon as possible because of that fact. They fooled aroumd, took the contracts to their attorney although I told them they would have time to get that done after everyone had signed them. Another offer came in at full price and they lost the property. Tears at that point were not the answer.
A really interesting and note worthy article.
I made the mistake of falling in love with the garden of our home, though it needed some work it was very big with loads and loads of trees. With the garden high on my priority list I missed a few of the flaws in the house, and it has cost us quite a lot to have it rectified. The main bath had a rotten pink carpet in it, actually all of the carpets were rotten. The roof was leaking. The security was lacking, the list goes on and on and on.
At least now our house is almost completely fixed up, and I love it even more.
In future I will not however be blinded by one element and miss the bigger picture.
It is good that in the end things worked out for the best BUT choosing a professional, full time agent to assist in the biggest investment decision of your life is critical, in my opinion, as i have discussed in other articles.
Very well written and helpful advice. As always.
my biggest problem when looking for a house was that I just don’t like shopping! I hate shopping around and being let down time and time again before you find something good! Now days it is much easier to find a home because of the internet. Just like with shopping I can browse at home before I decide to leave the house and check something out.