7 Disastrous Mistakes Homebuyers Make

1 – Not Researching the Location

You know what they say about Location, Location, Location? It will never fail as great real estate advice.

Research the location but you also need to spend time there. Eat in the restaurants in the neighborhood. Drive through the streets at various times of day and night. Are there kids running around during the day when they should be in school? Are there things that happen at night that don’t seem innocent?

Check the school scores and how many students live in-boundary if that’s provided – even if you don’t plan to have kids or your kids are grown. Good school scores and high in-boundary attendance indicate that people who live in the neighborhood have made more than just a financial investment there.

I made this mistake with the first condo I purchased when I was in my 20’s. I didn’t drive through the neighborhood at various times. I was so excited to find something in my budget that I neglected to notice several things that severely impacted my quality of life. First, I didn’t calculate the commute time to work. I spent a lot of time in traffic and that was when I was working full time for a Real Estate Developer and in Grad School also full time, spending time in traffic was not a luxury I had to spare.

Second mistake? I didn’t notice that the community was filled with a bunch of nasty old women. My first night in the condo I was warned that I better not have any parties. It was all downhill from there. Third mistake? Schools were abysmal. That didn’t directly impact me as I was in my 20’s and didn’t have kids (the good old days) but there were a lot of problems at the high school and that spilled over to our shopping center. Thankfully, I sold that condo but I drove through there a couple months ago and even the Giant Grocery Store closed. Unreal.

2 – Skipping Home Inspection

First let me say this and yell it from the back of the room: No one has skipped a home inspection on my watch.

Every single house, to include new construction, has things that need to be adjusted, fixed, repaired. In the crazy heyday of real estate, many people would do “pre-inspections” which was essentially a home inspection prior to the offer being submitted. This way you could waive the inspection as part of your offer but not be in the dark about the home’s condition. This also used to mean that there could be a dozen other people doing the pre-inspection, so it was always a disaster because you knew only one of those people was getting the house. You tried to be polite to the other buyers but really you wanted to claw their eyes out.

Skipping a home inspection can have catastrophic consequences. I could go through all the worst-case scenarios, but you know what they are. Leaking roofs, basement floods, structural issues, decades old water heaters or A/C units, failing boilers, rodents.

Just don’t do it. Always get a thorough home inspection.

3 – Not Checking Permit Status

There’s no way to really find out what percentage of home repairs are unpermitted, but I would bet it’s a lot. Probably at least 50%.

Locally, you can easily check for permits in most jurisdictions in the DC Area. There are lots of “flips,” where the permits are non-existent. There are some places like DC and Prince George’s County, Maryland, where they have been historically lax at enforcing permits.

I recently purchased property in Florida. The first thing the title attorney did was inform me there was an open permit on the property that he managed to get closed within the day. Impressive. I don’t even know what it was for, but it was interesting that they actually checked for that. It’s not something that is done here in DC. I do it for clients and will flag anything for the home inspector, but with so much information available online, this is important to do. When the market turns into a seller’s market, a lot of unpermitted garbage gets sold to unsuspecting buyers. And that will usually come back around as a problem.

4 – Not Buying Sooner

The best time to buy is always five years ago. In Washington DC, we’ve experienced a consistent seller’s market for the past few decades. There is always strong demand here, and there are always people moving here and people leaving. The trick though, is that people who leave often have plans to return, and they hold on to their homes. This leaves less homes for sale for others who arrive in town hoping to buy.

This past year has been one of the slowest in terms of sales, however, median prices are still up 6% over last year. This was what was so surprising as each month ended and the stats came out, all we heard was how bad the market was, how slow sales were and yet, prices continued to rise.

This doesn’t apply to all markets because there have been some serious slowdowns in other parts of the country. If you live somewhere and don’t have the country’s largest employer, who has set up camp in your town, the Federal Government, the reality may be different. But if you zoom out and look at purchasing a home now versus five years ago, in almost all cases the average and median prices are higher now.

5 – Not Hiring the Right Agent

You may have heard of a little lawsuit the Department of Justice filed against the National Association of Realtors. Prior to the NAR Settlement, only 17 states and Washington DC required Buyer Representation Agreements. The settlement was really directed at those 33 states where the premise of who represented the buyer and who paid the buyer was anything but transparent. While I understand the rest of the country is experiencing a lot of turmoil over this, the settlement changed very little for us locally. Buyer representation was always standard in Virginia, Maryland and DC and it is still a hugely critical part of the process.

There’s lots of chatter though over whether a Buyer’s Agent is necessary. I can’t speak for all Buyer’s Agents, but I can speak for myself. What is it that makes me valuable? First, let’s talk about what can happen if you hire the wrong agent.

Someone contacted me recently. He was watching my videos much like you are now. He purchased a condo from a flipper who renovated the whole building. He said they were having a lot of issues in the condo. I looked the condo up in MLS and saw two things. First, he purchased with an agent who works for a discount brokerage model. Second, I had shown a couple condos in this building to a client while they were all for sale. It felt very cheaply done and the floor felt unstable. I noted this to my client at the time, and we moved on.

Discount brokerage models can work for some buyers and sellers. But here’s the issue. You don’t know what you don’t know until it’s too late. Discount brokerages make money by working on volume. They have to close a certain number of homes “or else.” This means, you’re just telling them what you want to do and they may not offer up a solid opinion. They are more order-takers and less “advisors.” In fact, you may not even tour with a knowledgeable agent. You may be touring with an inexperienced assistant. Because they work on volume, once you sign with them, they will move on to the next client and turn you over to hourly administrative employees.

I asked if his agent was helping him navigate the process and he said no. This, unfortunately, is what happens to so many buyers when they don’t get the right people on their team. They are abandoned when they really need help.

I’m not a door opener. Finding the house is the easy part. You can do that online and you know it. My job is to navigate the process to get you TO and BEYOND closing. Almost 90% of agents don’t even sit down to explain the buying process to their clients. It takes an hour. If they can’t tell you what’s coming in a clear and understandable manner, are you even in good hands?

I work at times well after everyone else is in bed. I work when I’m on vacation with my family. I work on holidays when no one else in the world is working. And I’ll be working for you, with no retainer, and no guarantee of payment. If you don’t close, I don’t get paid – not even $1.00. Only when you close on a house is that commission paid. I work for a specific amount and, lawsuit or no lawsuit, not much has changed here. We are seeing that in most cases the seller still covers the commission.

A commission isn’t paid for opening a door or emailing a link to a house. You aren’t just paying for the time spent – you are paying for risk mitigation, time and money saved, the expertise and executing the protections they put in place for you. This is the kind of agent you must hire.

Choose wisely, my friends. Interview agents. Don’t just hire your friend who sold three houses over the past five years. Don’t be the agent I talked to the other day who said, “My phone’s not on from 9-5 because I’m at work.” What work?

Ask for specific examples of how they saved a client from a mistake, how they navigate the process, and what they will do for you.

6 – Thinking New Construction is Best

For some buyers, the idea of new construction is very appealing. You’re not buying someone else’s house and having to deal with the choices they made. Those model homes are designed to sing to people’s hearts.

You should know that buying from a builder is not like a normal transaction. They have their own contracts that protect them fully and do nothing to protect you as the buyer. They also won’t negotiate on anything. They offer what seems like a huge closing cost credit but it’s wrapped in with you using their preferred lender and title company. Sometimes they own the lender and title company.

You also pay a premium. Builders have to squeeze a profit out of the house they are selling and they won’t sell unless they achieve that profit. If they are publicly traded on the Stock Exchange, good luck. They won’t budge an inch. You won’t have equity in this house for several years, so if you are planning to sell in a few years, this is not the way to go. You would be better off financially buying a home that needs work and fixing it up to secure your best chance to come out ahead, financially.

7 – Choosing the Wrong Lender

I work with several excellent and well-vetted lenders. I don’t refer you to someone who is going to screw things up or who gives me kickbacks which is illegal. Sometimes people want to use a lender from their hometown several states away and while you can do this, know that not having a local lender can really impact your chances of getting a house. There’s a huge learning curve getting buyers to understand the local market, if the lender has to also figure out the nuances of getting a home it can really impede the process.

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