I Wish I Knew This Before Buying My First House
Buying a house is a big deal. Most would say it's the largest investment of your life.
But to that, I'd say: For what purpose are you buying the house?
Answering that question is another article all on its own.
Either way, here's everything I wish I knew before I bought my first house.
Hopefully, you can take my experience and apply it to your home buying efforts to get the best results possible.
Never Skip A Home Inspection
I've talked about home inspections extensively on this blog for one reason.
Inspections are a vital step for anyone looking to purchase a new home.
Yes, they may be a little pricey. Inspections can range anywhere from $350 - $500.
Typically, I've paid $450 per inspection.
It sounds like a lot of money, but wouldn't you prefer to know if the home your buying might:
Only have a year's worth of life left for the roof?
Need all new electrical?
Have serious foundation issues?
Should you discover significant issues with a house after going under contract, you can either:
Request the sellers repair the issues
Back out of the deal
Or continue moving forward and accept responsibility for the house as-is.
Whatever you do, you should never skip a home inspection.
Never Trust The Seller
I'm not saying that sellers are liars here, although some may be.
But you never want to make a buying decision based purely on what the seller says.
Sometimes, they honestly may not know something or genuinely believe what they tell you through no fault of their own.
Here's an example.
One house I bought supposedly had no electrical problems.
Why did I assume that? Well, because that's what the seller told me.
Halfway through the renovations, my contractor told me the electrical was shot, and we needed to rewire the entire house.
$4,500 vanished almost overnight!
Listen to what the seller has to say, of course, but always verify everything yourself.
Getting an inspection will help you avoid the mess I found myself in.
Use An Escalation Clause To Win The Bid
Are you in a hot real estate market where:
Almost every house has multiple offers.
Barely any home lasts longer than a week.
Most properties sell over the asking price.
I know it's frustrating when trying to win a bid, but there is something you can do if there's a house you really, desperately want.
Use an escalation clause.
An escalation clause can be written up by your agent and added to the special stipulations section of the purchase and sale agreement.
It might look something like this:
"Buyer will pay $1,000 over the highest bid up to $200,000 if they're not the highest bid."
An escalation clause can help give you an edge, but it may not always work.
An important thing to consider is there are unscrupulous real estate agents out there.
Hopefully, no one does this to you, but an agent can have someone else submit an offer just to drive up the price.
You Can Get Sued If You Don't Close on Time
Before I bought my first house, I didn't pay too much attention to the closing date I put in the offer.
This is a HUGE mistake!
If you fail to close by the date provided, and all your contingencies have been met, the seller can:
Keep your earnest money deposit.
Sue you for breach of contract.
Depending on how much earnest money you put up, you could be looking at a significant loss.
You can argue it's better to lose a little cash than buying a house you decided is not the right fit.
It may be rare for sellers to pursue legal action should you fail to close. It’s possible, and certainly not something you want to provoke!
If you can't close for a legitimate reason by the agreed-upon date, the best thing you can do is be upfront and honest with the seller.
As long as they are reasonable, you should be able to sign an amendment that gives you more time to close.
Sellers Want What's Best For Them
You can try brown-nosing sellers all you want, but sellers will pick the best offer that makes the most sense for them.
They will carefully sit down with their real estate agent and review all the offers submitted.
Or if your offer is the only offer, they will carefully consider it to make sure it meets their needs.
If it does, great! Hopefully, they accept the offer as-is with no counter.
But if they don't like it, they will either:
Make you a counteroffer.
Reject your offer.
Say nothing, which is the same as a rejection.
99.9 times out of 100, sellers are going to act in their best interest, and their realtors will advise them to act in their best interest as well.
I'm not trying to make sellers seem like jerks or anything. That’s just the way it is. And let's be honest, you'd do the same thing if you were selling a house too!
The Longer The House Has Been on The Market, The More Leverage You Have
Where will most of the negotiating power you'll have come from when working with sellers?
The more days on the market, the better position you're in to negotiate.
If the seller hasn't received any other offers, you'll be in a stronger position to negotiate.
Both of these points of negotiation can go hand in hand.
When you see properties sitting on the market for a long time, say 60 days or longer, the sellers may start getting anxious to sell.
If that's the case, you may be able to negotiate a better price with them.
Some sellers have balls of steel, though. I once watched a woman try to sell her house for over a year and only dropped the price by $5,000.
I made multiple offers, but she wouldn't budge.
If you have a house in your sights.
You believe you're the only one making offers.
And the home continues to languish on the market.
I've got a trick for you that might make sellers feel a bit of urgency, or it could backfire.
If you make a second offer on a property, drop it by $1,000. The seller might see the offer is getting lower and jump on the deal before it gets even worse, or they could be put off by it.
Use this tactic at your own risk!
Your Offer Looks Better With Fewer Contingencies
Every contingency you add to your offer is another opportunity for you to back out of the deal in the seller's eyes.
In your eyes, of course, it's protection.
But remember what we discussed above. The seller wants what's best for them.
You want to make sure the offer is as irresistible to the seller as possible, especially if you're bidding on your dream house.
You can include as many contingencies as you want, but the fewer, the better.
Let's review what contingencies you can include.
Inspection Contingency
You have the right to order a professional home inspection.
Within a given amount of time, you should request your inspection, and the inspector will create a detailed report based on what they find in the property.
Your realtor will likely have an excellent inspector recommendation for you.
Inspectors are trained to call out most general issues but may recommend a specialized inspector for problems that involve:
Plumbing systems
Electrical systems
Foundation issues
HVAC
Roofing
Once you receive the report, you can use the contingency to pull out of the deal if the results are far from what you'd like.
Instead of backing out, you can negotiate with the sellers to see if they'll make any repairs.
Something to consider is home inspection contingencies can act as a catch-all for you too.
Even if you are happy with the results, you can change your mind for a different reason.
Let's say you find a house that better matches your needs during the inspection period.
You just need to cite something in the inspection, and you may technically be entirely within your rights to back out of the contract.
Appraisal Contingency
An appraisal contingency is straight forward. All it means is the agreement is contingent upon the appraisal coming back either at or above the contract price.
Should the appraisal fall short of the contract price, all hope is not lost.
You can ask the seller to lower the price to meet the appraised value, or you can bring more cash to the table.
The sellers will most likely reduce their price, as who would buy a home for more than what it’s worth?