09 Dec Seven Deadly Buyer Sins
7 Mistakes to Avoid When Buying in Today’s Market
Negotiating a property to the best possible price is one way to build instant equity into your property. Remember that buying the property right is the key to your real estate investment. So, how do you get a seller to take less than they should?
1. Not consulting a market expert
Without the most relevant information regarding property values, market trends, upcoming development, etc., buyers can’t be fully informed. Knowing the ins and outs of the local market is the only way you can make the best decision. A professional agent is working in the market every day and has a knowledge base that extends beyond the actual properties as well as the potential pitfalls that could surround a property that looks good on the surface but may cost the new buyer thousands in the future.
2. Not having a plan for their purchase
Buying without a business plan for your property is like getting in your car and driving with no particular direction and wondering why you didn’t get where you were wanting to go. Many buyers make decisions based off everything EXCEPT their plan for the property. In order to make the best purchase choice should fit your plan. Your plan will include variables such as: How long will I own the property? What is important about the property if I resell it sooner than I thought? What type of financial performance do I expect from the property (future appreciation, income potential, etc).
3. Not Sticking with the Plan They Made
Many buyers will have a plan for their purchase up to the point that they start looking. Because there are always choices when you are buying, you can be tempted to abandon your attempt at finding a property to fit your plan. Instead, you find a property and then adjust your plan to fit the new property. Rarely will a property’s performance change if it didn’t already fit what you were trying to accomplish.
4. Not setting a limit when they choose a home
It’s human nature to become emotionally attached to a property that you like, especially if it is something that you will spend time in. It’s important to establish your top line before you begin negotiating. That top line will be based on LOGIC. If, during the negotiation you determine that you want to abandon the logic and spend more, at least you made a conscience decision. If you got caught up and just paid too much without prior analysis, you may find out in hindsight you overpaid for $10,000. Depending on your market appreciation and the value of the property that could mean an additional several years to make up that difference.
5. Over-improving for a short-term hold
Whether you are flipping or only planning on staying in your property for a couple of years, it’s important to make improvements that you will enjoy but beware of things that you will spend excessive cash on that will not affect the resale value. Consulting with a professional agent who sells a lot of properties similar to yours before you make improvements will get you the necessary information before you make investments. Again, you may still choose to make the changes but now it’s an informed decision.
6. Not understanding how agency works in real estate
The #1 financial mistake that buyers can make is not understanding who is representing who in a real estate transaction. Unless you are in fact the market expert and have negotiated multiple properties, it’s a good idea that you have a professional agent representing YOU in the transaction. Many times buyers find out too late that they were not represented or they were actually underrepresented because of a conflict of interest that they were unaware of. An agent is required by law to disclose the relationships that exist in the transaction, but make sure that you ask.
7. Trying to time the market
Sellers will use the phrase, “I’m waiting for the market to come up.” Buyers will say, “I’m waiting for the market to go back down a little more.” The reality is that NO ONE can predict with certainty what prices will do until we are looking at them in hindsight. When buyers have the information that proves to them that the market has bottomed out, it’s too late. They are going to pay more for the property. Waiting is the answer that a buyer will have when they don’t have a plan. If they have a plan, they can simply figure out if the plan needs work right now. If it does, they buy. If it doesn’t match, they don’t. They dictate in their terms, they don’t wait for the market to make decisions for them.
These 7 Mistakes can be very costly, but they are also easily avoidable. Knowing about them is the first step in avoiding them and making the best purchase decision that you can.