The hot housing market has changed the homebuying process. Today, buyers are pressured to make decisions quickly, submit highly competitive offers, and buy homes at unusually high prices. That pressure means it’s easy to get caught up in this fast-paced process, and buyers make mistakes.
If you’re planning to buy a home, take a few minutes to learn about the mistakes buyers make in a hot housing market to prepare for some of the most common pitfalls.
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Being aware of the things to avoid when buying a house can help increase your chances of finding and successfully buying the right house.
Getting pre-approved is essential in a hot market. Your pre-approval demonstrates to sellers that you are serious about buying a house and that you’re likely to get approved for a mortgage if they accept your offer. In today’s market, unless you’re pre-approved, many real estate agents won’t take you to view homes, and many sellers won’t consider your offer.
Taking the time to get pre-approved will help to prepare you to buy a home. You’ll need to start getting your financial documents in order, and you’ll learn how large of a mortgage you’re likely to be able to get. This information can help you to determine your budget and narrow your home search.
In a hot housing market, you may have to put in offers on multiple houses before a seller accepts your offer. You may even have a house under contract, only to have it fall through. Today’s homebuying process is competitive and frustrating, and it’s easy to feel like you won’t be able to buy the house that you want. Some buyers may settle for a house that isn’t really what they’re looking for, buying it out of desperation.
That’s one of the most important things to avoid when buying a house. Buying a home is a major purchase, and selling that home a few years from now is expensive. Remind yourself of the key features that your house absolutely has to have, and don’t settle for a house that really won’t work for you.
You may be tempted to waive the home inspection contingency to make your offer more appealing to sellers, but it’s important to consider whether that’s the right decision. Home inspections conducted by a professional can help to identify issues like plumbing, electrical, roof, foundation, mold, and asbestos problems that can be extremely expensive to fix. Waiving the inspection means you might discover major expenses after you have purchased the house.
Remember that while a home inspection isn’t always required for home insurance, some insurance companies do ask for an inspection, especially if you’re buying an older house.
Overpaying for a home is one of the more common mistakes buyers make in a hot housing market, and it’s easy to see why. Bidding wars are common in today’s hot housing market, and it’s easy to get caught up when a house you really want to buy is on the line. Prepare yourself and set some hard limits so you don’t make an offer in the heat of the moment and overpay for a house.
Even if you’re not in a bidding war, carefully consider the amount you offer for a house. Many buyers make offers over the asking price to stand out from other buyers, but offering too much can be a mistake.
If your bid is accepted and you’ll be paying for your home with a mortgage, you can only secure a mortgage for the home’s appraised value. For example, if you offered $350,000 for a home, but it’s appraised at $320,000, you will be responsible for paying the $30,000 difference in cash, plus your down payment and closing costs. If you can’t pay that difference, your deal will fall through.
When you overpay for a home, you can easily exceed your budget. If you spend too much on the house, it can be difficult to make your mortgage payments. You may also struggle to pay other homeownership expenses, like your home insurance premiums and closing costs. Instead, consider the long-term value of the house and make a reasonable offer that you’re comfortable with.
With home prices high, a fixer-upper might look like a bargain. But be careful to avoid taking on a project that’s too big for your time, talents, or budget.
Fixing up a house and turning it into the home you’ve always wanted can be rewarding, but unless you have renovation experience, it’s easy to underestimate just what’s involved. If you’re considering taking on a fixer-upper, take a hard look at your budget, timeline, and skills, and bring in a trusted contractor to help evaluate the house before you make an offer. It’s also a good idea to get some quotes on any work you would contract out, and compare those quotes to get an idea of how much you’ll pay.
The mistakes buyers make in a hot housing market can be expensive, can cause deals to fall through, and may lead to regret. We’ve highlighted some of the key things to avoid when buying a house, so you’re better prepared when you start your search.
Buying a home in today’s market definitely poses some unique challenges, but remember that it’s still possible to find the right home. The more prepared you are and the more you understand about the market, the better. To help, we’ve published a series of articles on tips for buying a house in today’s market, whether the market is going to crash, and more.
Paige Cerulli Paige Cerulli is a freelance content writer and journalist who specializes in personal finance topics. She graduated from Westfield State University and brings more than a decade of professional writing experience to the ConsumerCoverage team. Paige’s work has appeared in outlets including USA Today, Business Insider, and more.