Here are a few money-saving, pitfall-avoiding tips and tricks for buyers who want to do some smart home shopping this summer.

 

1.  Have a vision in place, before you start your house hunt:  Actually, have several visions in place.  Have a financial vision, complete with a clear picture of what your total income and expenses look like, in the  “after home buying”  view, including what you pay out for your home and related expenses, like HOA dues and homeowners’ insurance.  Have a vision of your life in your new home, including what you want to do, with whom and where you want and need to go – in the work, family and recreation areas of your life.

If you kick off your conversations with your mortgage broker and real estate agent with a clear understanding of the lifestyle you are looking to create, you’ll be much less likely to get derailed. With a clear vision in place and, ideally, on paper, you can clearly communicate your wants, needs, goals and financial boundaries to your professionals, telling them what you can afford, rather than trying to shoehorn your financial plans into one-size-fits-all mortgage guidelines. With a vision, the temptation of a low-priced, but completely inappropriate home will not lure you into buying the wrong place for your needs. (Nor will an amazing home that is simply out of your personal price range – no matter how great a value it is for the money!)

 

2.  Don’t let affordability get between you and reality:  High affordability doesn’t necessarily mean you can get every single thing you want – and name your price. The fact is, even people who are spending millions for their homes don’t get everything they want!  Some buyers insist that they need X number of bedrooms and Y number of bathrooms in move-in condition for a price that is just not going to happen, even in this clearance sale climate, and end up looking and looking, ad infinitum.

If your agent has shown you home after home that is what you want, but has sold for more than you want to spend, and you’re confident that you can find or cut a better deal because the market is down and you just so happen to be a brilliant negotiator (!), you might be at risk of falling into this trap.  There are deals to be had, but if you don’t stay grounded in reality, you’ll end up chasing your tail and missing out on the tax and lifestyle advantages of home ownership.

If you’ve been house hunting for months and months on end, your agent keeps trying to tell you that you should search in a lower price bracket, you have repeatedly gotten overbid or you just can’t seem to find the precise home you seek in the location and price range you seek, at least consider the possibility that you might have an outsized wish list for your budget. Take a step back, revisit your vision, and remind yourself what’s really important.  It’s okay to save some “must-haves” and “deal-breakers” for your next home purchase!

 

3.   Get a local expert to brief you on the local market, then screen out the noise:    Now more than ever, it’s essential to have laser beam focus on the information and strategies that will get you what you want – whether it’s an amazing deal on the home you’ve always wanted or simply success at becoming the owner of your first home at a price you never thought would ever be possible. Otherwise, you’ll end up all over the place, spending your time, money and sanity attending auctions, getting worked up over distressed properties that aren’t yet for sale, trying to negotiate deals with sellers who are in no position to cut them and having your low ball offers on bank-owned properties rejected time after time.

Don’t let a news story about a guy in Minnesota who got a home for $3.27 be the basis for your entire home buying strategy. Instead, ask around and get referrals to a local broker or agent who has a track record of helping the people you know. Ask them your questions to get a sense for whether they might be a good fit for you – if they are, and you trust them, then consult with them on the dynamics of your local market.  The market is down everywhere, relative to 2006.  But some markets – and some neighborhoods within markets – are still seeing multiple offers and home prices which are relatively recession-proof, compared to what you’d expect from the national news.

Once you have a strategy in place, work it – don’t let your acupuncturist or shoe repair guy convince you that your strategy is wrong, that you could get the place for cheaper or that the bank should absolutely do every single repair, or you should walk away from the deal.  Many would-be buyers lose out on great homes because they take negotiating advice from their holistic veterinarian over that being offered by their broker or agent.

 

4. Read everything: Good faith estimates. Contracts, Disclosures, Inspection Reports.  There is a long, long list of multi-page documents that are very easy to “just sign” when you’re in the heat of the hunt and think you’re on the scent of an amazing deal. I’m not suggesting you ask for a week-long pause button to read every document, either – rather, read them when you get them, ask questions, and keep asking until you understand the documents.

Many buyers this summer will make offers on more than one home before they get into contract on “the one,” and many of those properties will be short sales or foreclosures.  With distressed properties, every contract is different, so it behooves you not to go on autopilot, just skimming the papers as you might otherwise. Also, inspection reports might reveal red flags and condition issues that you’d normally expect to see in the seller’s disclosures.  It’s especially critical, in these situations, to fully understand as much as you can about the property, your loan, and your obligations and due dates under the contracts.

 

5.  Stop your mental accounting and do the actual math – on paper :  In the field of behavioral economics, mental accounting refers to the tendency we humans have of doing math in our heads, separating things like easy money (e.g., the so-called “instant equity” from buying a home for less than it’s supposedly worth) from hard-earned wages and salary, and making spending decisions differently from these different mental accounts.

On the scent of a good deal, and in the heat of the hunt, even the most meticulous home buyer can go up a few thousand in offer price to beat out other buyers.  No problem, right?  Well, but then when the inspector uncovers a few needed repairs, they make a mental guess as to what they’ll cost, and add that in – again, mentally. Then, when the lender requires a few extra thousand bucks than expected to close, that goes on top, but again, only mentally.  And mental money tends to stretch a bit longer than real money does!

So, you can see how it’s possible to break the bank when you thought you were in great shape because you scored such a great purchase price for the property itself.

Even if you hate budgets with every iota of your being, buck up on this one project, pull out the calculator or open up a spreadsheet and keep track of every line item. Get actual repair bids during your inspection period, to the extent possible, and get your math mojo on. It’s fine to buy and incur these overages here and there, but keeping track of them is the key.  Surprises are for birthday parties, not for real estate transactions, and not for your bank account, either!

Keeping a strict tab on the expenses you incur during the transaction or will need to incur afterwards will save you so much drama later.   “By Ed Eissa”