Clever buying can save you many thousands of dollars when you are investing in a new home. Discover how you can buy the home of your dreams at the best possible price.
Making the Most of Your Biggest Investment
For most of us, buying a house is by far the biggest investment we will ever make in our lives. Yet strangely enough, it is often one that we don’t consider carefully enough. People who spend weeks agonizing over which new car to buy, or where they should go on vacation, often buy their future home almost on a whim.
Sometimes that works out – sometimes it is a financial disaster. Common sense dictates that making your biggest purchase ever is a decision that should require some careful thinking. The difference between a good decision and a bad decision can literally run into tens of thousands of dollars, or perhaps even hundreds of thousands.
Scary, huh? So to put you on the right track, here are 10 simple house-buying tips that will save you a ton of money. And believe me, I know – because I learned most of these lessons the hard way. So benefit from my painful experience and save yourself a fortune on your next house purchase.
Think Like a Bank Manager
Because your house will be your home for many years, it is inevitable that your emotions get involved in this decision. But if you let your heart make the choice instead of your brain, you could be setting yourself on the route to financial ruin.
The sheer size of a house-buying transaction means that this has to be a financial decision more than an emotional one. So think like Scrooge and become a tough bean counter. Only buy if the numbers add up in a way that the world’s meanest bank manager would approve of.
If not, you should be prepared to just walk away. While this particular house might seem to be exactly right for you, it is the wrong house if you can’t make the math work. There will always be another house and another deal just down the road.
Stay in Control of the Situation
A few years back, my husband and I went to look at a home that seemed ideal for us. The owner was really friendly, and invited us to bring the kids over the next day to see what they thought. It seemed like a great idea at the time…but it was a huge mistake!
The kids loved the house, and immediately starting picking out their future bedrooms. They worked out where all their stuff would go, and start imagining all the fun they would have in the backyard. In short, my husband and I suddenly found ourselves committed to the house because the kids were already planning on moving in. So when the owner jacked up the price, we caved in and paid the extra…just so we wouldn’t let the kids down.
Don’t make this mistake. Stay totally in control of the situation and don’t make any kind of commitment until you have the price locked down and everything else organized and in place.
Fix Your Top Price
We could have avoided the situation mentioned above if we had been rigid with our ceiling price. Now when we look at new homes, we do the math and work out what is the maximum we are prepared to pay. If the price goes over that number for any reason, we walk away. Even if it is just an extra dollar.
Get Your Loan Approved First
In the post financial crisis era, getting approved for a home loan is harder than it used to be. That’s a good thing, because at least you won’t be able to borrow more than you can afford. But it means that you should get your loan requirements approved in principle before you start viewing houses.
As well as avoiding problems further down the track, this puts you in a stronger position as a buyer. If you have rock-solid finance behind you, you will be taken seriously and can get away with a lower offer.
Get the Best Deal Possible
People often don’t appreciate that the purchase price of the house is usually not your biggest cost when buying a home. If you take on a large mortgage, then the total sum you will pay in mortgage payments over the next few decades may far exceed the purchase price.
So getting a good deal on your loan is not just important, it is essential. Don’t just go with the standard deal offered by your regular bank. Go online and check out all the options available, looking for special deals that will cut your mortgage costs to the bone. If you get this right, it could save you tens of thousands of dollars over the period of the loan.
Focus on the Fundamentals
They say that first impressions count, and that is certainly true when buying houses. People want to walk into a home that looks beautiful, ready for them to move in. They imagine themselves relaxing in this new home at the weekend, inviting friends over for dinner and enjoying the good life.
But sometimes when you scrape beneath the veneer, you find a different picture. A home that is beautifully decorated may be hiding structural problems, subsidence or termites. So don’t be too swayed by what you see on the surface.
Make sure you get all the necessary inspections and surveys done, so that you know exactly what you are buying. It is always worth paying the extra money for a structural survey, rather than just a valuation. Even relatively new homes may be hiding dark secrets.
Conversely, a home that looks a little tired on the surface may be structurally sound underneath. But because it doesn’t look ready to move in, other potential buyers may be put off. That’s an opportunity for you to grab a bargain. You may find that you can buy such a home under market value, and add thousands to its worth with just a few weekends of simple renovation and redecoration.
Cut Your Losses When Deals Go Bad
You may find that you get half way through the sales process when a problem arises. Maybe your surveyor has identified a serious problem, or the vendor has received a higher offer. If you have already spent money on inspections, surveys and loan arrangement fees, you may be reluctant to pull out. Quitting now would mean many hundreds of dollars down the drain, right?
Maybe so, but that is still better than doing a bad deal. You have to accept that these ‘sunk costs’ are gone, and you can’t get them back. Throwing more good money after the bad is likely to make the situation worse. Any good stock investor will tell you that learning to cut your losses is the secret of success, and the same holds true for real estate. Pull out and move on to the next deal.
The Realtor is Not Your Friend
How many times have you heard a realtor say that he or she has a found a property ‘especially for you,’ or that a cut-price is going to be offered because you a ‘favorite customer?’
Forget it. You are not the customer. The realtor gets paid by the vendor, not the buyer, so the seller’s interest will always come first. So don’t be fooled into thinking you are getting a special deal when you are not. Be vigilant, and make sure you understand exactly what you are buying.
What does work in your favor, however, is the fact that the realtor only gets paid when a sale is made. That puts you in a stronger position once a price is agreed. The last thing the realtor wants is for the sale to fall through, the sales commission disappearing with it. So this is a good time to put pressure on the realtor to sweeten the deal.
Buy What You Need
That house with the enormous back yard may look beautiful, but do you really want to spend all your weekends sitting on a ride-on and cutting, pruning and weeding? If you love gardening, that’s great. But if your idea of a perfect Saturday is going shopping at the mall, then you should think again. A house with a smaller yard will not only result in smaller mortgage payments, but will free up more of your precious time, too.
You may see a house with five bedrooms, and think how wonderful it would be to have those spare rooms for family visitors over the holidays. But remember that in order to get those rooms which are only used a couple of weeks a year, you will be making bigger mortgage payments every month for decades. A couple of sofa beds in the den would work out a whole lot cheaper.
Negotiate, Negotiate, Negotiate
In the real estate world, everything is negotiable. And by becoming a good negotiator, you can save yourself a fortune. For every thousand dollars you can knock off the purchase price, you will making a significant dent in your mortgage payments.
Once you have finally agreed a price, there is still room to negotiate. What exactly is included in the sale? Try to get carpets, drapes and other fixtures and fittings included. Remember that this is the biggest deal of your life, and small savings now add up to big financial upsides for the rest of your life.
Buying a new home can be a daunting experience, but it is also an adventure. If you make the right financial decisions, you will be taking the next step towards a new and happy stage in your journey through life.