Thinking about Buying a home? Watch out for these pitfalls!

Real Estate Pitfalls

You are probably expecting me to tell you the normal pitfalls you see every time you google “things home buyers need to watch out for”.  You know to make sure you get a home inspection, make sure you don’t bust your budget, make sure you get everything in writing, etc.   Although all of these are very important, they are not the most common in the Tuscaloosa area.  Here are the most common in our area.

  1. Not adhering to contract timelines: We see inspection dates of 14 days fairly regularly in this area.  On our contract we included home inspection, wood infestation report, septic inspection and survey in this inspection period.  That date is not something we merely TRY to adhere to, we MUST adhere to it.  If the inspections are not completed during this time frame then you are accepting this property in “As-Is” condition.   Your Realtor should make you aware of these dates and make sure you don’t forget about these inspections.   Other deadlines are applying for a mortgage, and closing dates.
  2. Not getting a septic inspection: Obviously this is only needed on properties that have a septic tank.  But I have seen many buyers want to pass up this inspection due to the cost, which is around $300-$450.  This inspection can save you thousands!  I have seen some septic repairs in excess of $10,000.  This is not something you want to have to deal with right after you make one of the biggest purchases of your life.
  3. Thinking foreclosures are the best deals:  Although many foreclosures can be deals, most of the time in order to make that deal a reality you need lots of cash on hand!  The banks that own these properties will not do repairs other than what they have already done.  This means all of the work that needs to be done falls on you.  Not to mention the issues you may have getting a mortgage on the property due to its condition.  I am not saying to avoid foreclosures completely but you do need to be very discerning when looking to purchase one.  You don’t want to be in a situation where you purchase a home and find thousands of dollars in repairs and upgrades that are needed once you move in, even though it passed appraisal.
  4. Spending money on credit before closing:  DO NOT BUY ANYTHING ON CREDIT UNTIL YOU CLOSE! If you must: talk to your lender before you do it.  I have seen this happen too many times.  Once, while representing a seller we had a buyer that purchased almost $10,000 worth of furniture before closing.  She didn’t think the lender would pull her credit again.  Just FYI lenders pull credit one last time a day or so before closing to make sure your situation has not changed. The situation with the woman who purchased $10,000 in furniture put her over the allowed debt to income ratio, and the furniture company would not allow her to return the furniture, so she now has $10,000 worth of furniture and no home to put it in.  The seller kept her earnest money.    This is not a situation you want to put yourself in!
  5. Letting too many people tell you what is best for you:  Now I am not saying your parents and your friends opinion is not important, but I have seen a few people that “know” the market better than the statistics from MLS.   I saw a young couple loose out on a great deal because they allowed a distant relative to convince them that the home was way over priced for the area.   The statistics showed that the home was underpriced by about $10,000.   Needless to say the home sold a few days later for more than asking price and shortly after the home down the street came on the market for $15,000 more. It was smaller and had fewer upgrades.  If you feel good about a property you like and the statistics show it is not overpriced don’t let others convince you differently.  They will not be the ones purchasing or living in the home.
  6. Don’t forget to check your emotions at the door:  Its easy to fall in love with a home and overlook, or underestimate repairs and necessary upgrades.   By allowing yourself to fall in love with a home too quickly you risk overpaying, or worse, not getting the few necessary inspections that will cost you down the road.   Also, there is no guarantee you will get the home you are in love with.   The market has become very competitive and we are seeing more multiple offer situations on homes that are in popular areas and are priced right.  If you don’t get the home, don’t get down.  There will be others!

Chris Lee   –  RealtySouth  –  Tuscaloosa, AL           205-233-5183          www.chriswlee.com      clee@realtysouth.com

My Home didn’t Appraise, Now What?

You finally got an offer on your home, the home inspection results were negotiated successfully and then the bank ordered an appraisal .   Thats when things went wrong.   There could be a lot of reasons why it didn’t appraise but that’s another post.

When your home doesn’t appraise you have a several options.  I am going to discuss each of these options and some of the pitfalls with each of them.

So lets say for the sake of having a number to work with your home was under contract for $165,000 and the appraisal came in at $150,000.

As soon as this happens your Realtor® should see if they can find any comps that they could send to the appraiser that they might have overlooked.    This doesn’t always work.  Many times there are other reasons the appraiser has to use the comps they chose (i.e. date of sale, proximity, etc.).

1.)  Your first option is to ask the buyer to pay the difference.  This is the best deal for you, the seller, but it usually doesn’t work.  In todays real estate market many buyers are getting USDA (100% financing) loans, and many of the others who are getting FHA (min.3.5% down payment) and Conventional (min 5% down payment) are only putting down the minimum down payments and asking for most of their closing cost to be paid due to lack of funds.  This lack of funds makes it impossible for some home buyers to come up with their down payment and closing cost plus the $15,000 difference in the appraisal.

Many other buyers simply will not come up with the extra funds because they see it as purchasing a home which is upside down in equity based on the appraised value.

2.)  Your second option is to try to reach a mutual agreement with the buyer.   Maybe they will come $7500 out of pocket and you can meet in the middle at $157,500.   This is a better option for many buyers who don’t  have the cash to come up to the full amount over appraised value.  Buyers still have similar concerns as in option one, but it does require less upfront money for the buyer.

Both option one and two may be limited to buyers who have the money and feel that this property is a sound investment despite the appraisal, or they have excess funds and have just really fallen in love with the property.

 

3.)  Your third option is to lower your sales price to the appraised value.    This option is the most common and there are several reasons for this.   Many of which pertain to the buyers feelings on this as mentioned above. However, the main reason for this is due to the fact that even though an appraisal is a professional opinion of value there are many common statistics that go into finding this value.  Therefore, if you can’t come to an agreement and end up canceling the contract, you will have to wait for another offer and there is a good chance the next appraiser will come to a similar value.    This obviously can be hard for a seller but due to the likelihood of new offers and their appraisals being valued the same, lowering the sales price is usually the best plan of action.

Of course if the appraised value is something you can’t handle then you may need to remove your home from the market and wait until the market catches up.   Just be sure to talk with your Realtor® to see what the price trend is in your market.

 

For questions please fill out the form below and Chris Lee will Contact you.