4 Mistakes of First Time Home Owners

Are you starting to look for your first home? There are so many moving parts, many unfortunately make some costly mistakes. Here are some mistakes other first time home buyers have made that I am going to share with you, so that you are better prepared for the process!

1. Not getting preapproved - Any time you feel you are in a position to purchase a home, you should definitely get pre-approved and understand your budget before going out and shopping for homes. It's like having a credit card at the mall, but not knowing its limit. There are many instances where a client will tell me he can afford something like a 750,000 home, but is then approved for a 350,000 loan. There can be a world of difference, and many factors drive if you can get the loan you want, so the best thing to do is sit down with a lender and get those documents out sooner rather than later. If you do not have a lender you can turn to, your agent should have several trusted lenders they find reliable.

Also note that a pre-qualification and a pre-approval are different. A pre-qualification is a quick snapshot stating that based on your credit it seems like you can obtain a loan of X. A pre-approval takes it further and requires additional documents to be submitted. A pre-approval is what is needed when submitting an offer in the San Diego market, and an offer is rarely considered without one.

2. Working with the listing agent - The listing agent has signed a contract with the seller. This means the listing agent has a fiduciary duty (the highest legal duty bound to ethics) to work in the best interest of the seller first and foremost. This means that the agent also must first get approval from the seller that he can even work with the buyer. It also means if the agent is working in the best interest of his seller he cannot promote a buyers offer when there are clearly stronger offers. A buyer cannot get a "better deal" by working with the listing agent. In fact in some states it is illegal for the agent to be a dual agent, so it should also be a red flag if a listing agent says you can save money by using the listing agent.  Ultimately a dual agent gives up a lot of fiduciary responsibilities and can no longer advise you in negotiations, counters, or requests for repairs or credits; the agent can only be a middle man. The negotiating and representation is not over after an accepted offer and you are essentially giving up your right to representation as a buyer. In addition, listing agents are human. The problem here is if an agent can truly be objective. The reality is the listing agent has a longstanding relationship with the seller. The agent may have sold a home for them before, and is probably out looking for their next home. The sellers have great rapport with the listing agent. You also have to ask if the listing agent can give you objective comparables. Obviously what the agent priced the home at is what he believes it to be worth, and may send you comparables only to strengthen that. At the end of the day I do not think an agent can offer the same loyalties to both parties, which also then brings upon double the legal liability.

Yes, you will have listing agents jump at the opportunity to represent both sides, but then you know you have an agent driven by monetary goals rather than the best interest of their client. If this is your dream home, you want to make sure the transaction is clean and nothing is overlooked because an agent wants to close a deal. A good listing agent would not choose to be a dual agent, IMO.

3. Constant cold feet - Buying a home is probably the greatest investment we will make in our lives and I definitely understand that; the stress of knowing you have debt that needs to be paid is huge. That is exactly why it is very important for us as agents to set expectations of how the process will play out. Part of what is important to me is handling my buyer's anxiety and stress correctly. Things will always come up, and it's good to set expectations of what things may go wrong, and how we will handle them before they occur. But, there are some clients who no matter how you try and dispel their worries, will attach to their worries. I am talking about clients who are backing out of three or more contracts. If this is happening, it may no longer be about the house, but about the buyer. This is a time where I would really advise the buyer if he or she is ready to commit to purchasing a home, or if these commitment issues mean always finding something wrong, leaving you never purchasing a home. Putting yourself through constant frustrations and indecisions makes each next offer the more harder.

4. Using your aunt as your real estate agent - The real estate industry is a competitive one, and many times buyers do not understand how crucial a role your real estate agent plays in negotiating the home you want. It can mean thousands of dollars if you have someone that knows how to negotiate in getting what you want while also giving the seller what he wants. A real estate agent is a salesperson, and to be a good salesperson requires active and daily practice of negotiating and getting into the mind of the seller.  Are you using family or friends because they are family or because they are good? If she wasn’t your aunt would you still use her? At the end of the day you don’t want someone who butchers your deal because they are a part time agent transacting two deals a year.