The Biggest Mistakes Buyers Are Making Today

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Buyers face challenges in any market – and today’s is no different. With higher mortgage rates and rising prices, plus the limited supply of homes for sale, there’s a lot to consider.

But, there's one way to avoid getting tripped up – and that’s leaning on a real estate agent for the best possible advice. An expert’s insights will help you avoid some of the most common mistakes homebuyers are making right now.

Putting Off Pre-approval

As part of the homebuying process, a lender will look at your finances to figure out what they’re willing to loan you for your mortgage. This gives you a good idea of what you can borrow so you can really wrap your head around the financial side of things before you start looking at homes. While house hunting can be a lot more fun than talking about finances, you don’t want to do this out of order. Make sure you get your pre-approval first. As CNET explains:

“If you wait to get preapproved until the last minute, you might be scrambling to contact a lender and miss the opportunity to put a bid on a home.”

Holding Out for Perfection

While you may have a long list of must-haves and nice-to-haves, you need to be realistic about your home search. Even though your ideal state is you find a home that checks every box, you may need to be willing to compromise – especially since inventory is still low. Plus, a home that has everything you want may be too pricey. As Investopedia puts it:

“When you expect to find the perfect home, you could prolong the homebuying process by holding out for something better. Or you could end up paying more for a home just because it meets all your needs.”

Instead, look for something that has most of your must-haves and good bones where you can add anything else you may need down the line.

Buying More House Than You Can Afford

With today’s mortgage rates and home prices, there’s no arguing it’s expensive to buy a home. And while it may be tempting to stretch your finances a bit further than you’re comfortable with to make sure you get the house, you want to avoid overextending your budget. Make sure you talk to your agent about how changing mortgage rates impact your monthly payment. Bankrate offers this advice:

“Focus on what monthly payment you can afford rather than fixating on the maximum loan amount you qualify for. Just because you can qualify for a $300,000 loan doesn’t mean you can comfortably handle the monthly payments that come with it along with your other financial obligations. Every borrower’s case is different, so factor in your whole financial profile when determining how much house you can afford.”

Not Working with a Local Real Estate Agent

This last one may be the most important of all. Buying a home is a process that involves a lot of steps, paperwork, negotiation, and more. Rather than take all of this on yourself, it’s a good idea to have a pro working with you. The right agent will reduce your stress and help the process go smoothly. As CNET explains:

“Attempting to buy a home without a real estate agent makes the process more arduous than it needs to be. A real estate agent can give you professional legal guidance, market expertise and support, which will save you time, money and stress. They can also increase your chances of finding the right home so you don’t have to spend hours scouring the internet for listings.”  

Bottom Line

Mistakes can cost you time, frustration, and money. If you want to buy a home in today’s market, let’s connect so you have a pro on your side who can help you avoid these missteps.

Avoiding Commissions to Real Estate Agents Could Cost You Much More Than It Could Save You

A lot of people think that the Internet has made it so much easier to sell a house, and have a difficult time understanding why they should still hire a real estate agent and pay them commissions.

It’s understandable when you only consider the aspects of selling a house that boil down to buyers and sellers finding each other. The internet has certainly made that part simpler.

There are plenty of ways for sellers to use the internet to make it known that their house is for sale to potential buyers, without having to rely on real estate agents and their access to the multiple listing services.

In fact, there are even buyers who use the internet to make it known that they’re in the market to purchase houses, and offer to buy from sellers directly in order to make it a quick, easy, and less costly process by cutting out the need for agents.

So, with the internet creating such an efficient marketplace, why should a seller bother hiring an agent?

Well, because it could end up costing you more than you think you’ll be saving…

55,000 Examples of Sellers Who Lost Money

The Federal Trade Commission (FTC) recently came to the rescue of 55,000 home sellers who were misled by an online home buying company called Opendoor Technologies. The company promised sellers that their cutting-edge technology would save them money, by offering to directly pay them “market value” for their home, and cutting out the costs (such as commissions) involved with the traditional home sales process involving agents.

“Rescue” might be a strong word, though. Because, according to this MSN article, the FTC will only refund about $1,000 to sellers who are even eligible to receive a portion of the $62 million dollars the company was fined. That’s likely a drop in the bucket compared to how much most of those sellers actually cost themselves by selling to Opendoor. The FTC said, “In reality, most people who sold to Opendoor made thousands of dollars less than they would have by selling their homes using the traditional process.”

According to the FTC findings, here are two ways selling to Opendoor either cost, or lost sellers money:

• Sellers were misled about the true market value of their homes and convinced to sell for less than they could have sold their house for on the open market.
• Sellers ended up paying more in costs to Opendoor than sellers typically pay to work with real estate agents.

In order for companies like Opendoor to make money, they have to offer below market value for a home. According to Tomasz Piskorski, a professor at Columbia Business School who has done research on this type of business model, on average they buy homes at a 3.6% discount compared to what sellers would get by selling their home through the traditional process.

It’s difficult to say how much each seller paid in fees in the past, but Opendoor is still in business, and here are some of the costs and fees they publish on their website:

• A “service fee” of 5% on every home they buy, which they literally say is “similar to how commission works for real estate agents.” This is Interesting, considering they positioned themselves as a way to avoid the cost of real estate agents…
• They also may deduct “repair costs” for anticipated repairs, so sellers don’t have to pay cash up front to sell their home. This is a slippery slope, because they are “anticipating” what could be wrong with the house, not necessarily basing it upon an in-person inspection by a licensed inspector.

Considering how much homes are typically worth, $1,000 probably isn’t going to help most of those sellers recoup anywhere near the amount of money they lost. It doesn’t even come close to making up for the loss of wealth those sellers should have after selling an asset that often accounts for much of a person’s net worth. Sadly, in most cases, the decision was likely made in hopes of walking away with more net worth by eliminating the cost of real estate agent commissions.

No matter how easy it may seem to sell and buy houses due to technological advances, there’s a lot more to getting the best results possible. So, if you find yourself questioning whether it makes sense to hire a real estate agent and pay a commission, just think about the 55,000 home sellers affected by this one company. While they probably all felt like they were going to come out ahead by avoiding agents, now they’d probably all gladly turn back time, hire an agent, and willingly pay a commission.

The Takeaway:

It may seem appealing to avoid paying real estate commissions, especially since technology has seemingly made it easier to sell your home directly to a buyer. However, without the help of an agent who knows market values, and has the skills to get you the most for your house, it’s easy to lose more money than their representation would’ve cost you.

Should You Sell Your House and Buy Another One, or Stay and Renovate the Current One?

Selling your house and buying another isn’t a no-brainer decision for many people right now. For instance:

• If you have an interest rate on your current mortgage that’s lower than the current rates, you might question whether it makes sense to give up such a low rate for a higher one.
• In addition, the prices of houses are still at all-time highs in many areas, which could make you feel like you’d be overpaying for a new home, even though you could get a premium for your current one.
• And last, but not least, there is a shortage of houses for sale in many areas, which might make it difficult for you to even find a suitable option, and even if you do, you might face fierce competition from other buyers.

Those are all legitimate concerns worth taking into consideration, if you’ve been thinking about selling your house and buying another one.

Which could lead you to considering just staying put in your current house, and doing some improvements to it instead, using some of the equity you’ve likely built up in your home in the past few years.

That’s not a bad decision… if you truly plan on staying put for many years to come.

What’s Causing You to Think About Moving Deep Down Inside?

People sell their house and buy a different one for many different reasons. Some of them can be satisfied by simply keeping the current home and doing renovations or additions, like upgrading to a nicer, more updated home, or increasing the amount of living space you have, for example.

But there are many things you can’t solve without moving to a different house, such as:

• If you need to relocate due to your career, or for a better commute.
• Downsizing your current home by making it smaller wouldn’t be impossible, but it wouldn’t make much sense.
• There’s no law saying you can’t live with your ex-spouse if you get divorced, but it’s usually not ideal.
• If you want schools that are a better fit for your children, moving to a district that has programs they would benefit from is easier than getting the current schools to change quickly enough for your children to benefit.
• Property taxes tend to go up over time, not down, so if you want lower property taxes, you need to move to an area that has lower taxes.
• If you live on a main road or near train tracks, for example, you can’t change that without moving.

If selling your house has been on your mind, there’s something that’s been driving those thoughts. Think long and hard about what the reasons are deep down inside, and whether they’ll creep back up in the future if you decide to stay and renovate your house.

Even if you improve your current house, there are a lot of things that you cannot change; you could find yourself still wanting to move in the near future anyway, after having invested money you may or may not get back when you do eventually sell.

So, if you’re planning on staying in your current house due to the current market conditions, you should think carefully about how long you will actually stay in your current house, and what renovations you plan to do before you spend any money on them.

Think Twice Before Doing Any Renovations to Your Current House

If you decide to do renovations or home improvements to your house, rather than sell it and buy another one, you might presume that anything you do will raise the value, which will only end up benefiting you when you do decide to sell it in the future.

Well, the good news is that almost any improvement you make will increase the value of your house! But the not-so-great news is that the amount your home goes up in value probably won’t be as much as you even spent on any particular project.

In fact, as CNBC recently reported, according to the 2024 Cost vs. Value Report, only three home improvement projects produce a positive return-on-investment. The current projects that will net you the most profit when you sell your house are:

• Replacing your garage door. That will produce an average profit of $4,238.
• Replacing your front door with a new steel door. Doing this results in an average profit of $2,075.
• Replace your siding with a stone veneer. This will add $6,634 to your net profit.

Unfortunately, none of those are likely on the top of your list of things you’d choose to do to your home to make it any better or more enjoyable to live in. Every other renovation you might choose to do to your home may very well increase the value of your home, but it won’t even improve the value by as much as it cost to do the project.

So if you’re envisioning major kitchen and bath renovations, or an entire addition to your home, don’t plan on those improvements producing a positive return on your investment when you sell.

If you plan on staying in your current house for years to come, it really doesn’t matter if you can afford the projects and you will get more enjoyment living in the home.

But you might want to avoid doing any major renovations, if you think that there’s even a slight chance you’ll still have the urge to move when the current market conditions ease up, and there are lower interest rates and more homes on the market to choose from.

Before you decide which route to choose, consider asking your local real estate agent for their insights and advice. While those home improvement statistics are generally true, they may vary in your local area and price range. An experienced agent can help you make an educated decision on what to do, given the current market and your personal situation.

The Takeaway:

Thinking about selling your house and buying a new one? It’s not an easy decision these days. Low interest rates on your current mortgage, high home prices, and a housing shortage might make you want to stay put and renovate instead. But before you commit to renovations, consider why you want to move. Some reasons, like needing more space or better schools, can’t be fixed by staying.

Remember, not all home improvements pay off. Replacing your garage door, front door, or siding are the only projects likely to give you a profit when you sell. Big renovations might not recoup their costs. So, if there’s any chance you’ll still want to move when market conditions improve, think twice before diving into major projects. Consulting a local real estate agent can help you make a smart decision based on current trends and your situation.