10 Mistakes to Avoid When Buying a High-Value Asset or Luxury Home
You’ve been weighing your options, looking around casually. Now you’ve finally decided to do it - you’re ready to buy your dream home. The process of buying a new home can be incredibly exciting, yet stressful, all at once. Mistakes may prove costly. Use the following list of pitfalls as a guide to help you avoid the most common blunders.
Mistake 1: Not Enough Research
Market research is crucial when buying high-end real estate. Buyers need to make sure that the appraisal and asking price are in line with the current market. With careful research and determination, the keys to that dream home can be yours.
Mistake 2: Lack of Financing Pre-Approval
Despite common misconceptions, not all luxury homebuyers pay cash. Many rely on financing. In the luxury market, sellers may restrict showings to individuals who have been pre-approved or provide other proof of solvency. If you are not a cash buyer, it’s important to obtain mortgage approval. Do not mistake pre-approval by a lender with pre-qualification. Pre-qualification, the first step toward being pre-approved, will point you in the right direction, giving you an idea of the price range of houses you can comfortably afford. Pre-approval, however, means you become like a cash buyer, making negotiations with the seller much easier and strengthening your position.
Mistake 3: Not Considering Taxes, Insurance and Down Payment
Even individuals looking at luxury properties need to set a budget. The budget should not only include the list price of the home, but property taxes. It is also vital to understand that required down payments will be larger and there will likely be different homeowner’s insurance requirements. All these factors affect your buying budget, as well as your monthly payments. If you wait until the last minute to find insurance cover, you’ll be rushed to accept an insurance policy that might not be the ideal fit for you. Make sure you give yourself enough time to shop around in order to get the best deal and cover.
Mistake 4: Allowing “First Impressions” to overly influence your Decision
The first impression of a home has been cited as the single most influential factor guiding many purchasers’ choice to buy. Make a conscious decision beforehand to examine a home as objectively as you can. Don’t let the current owners’ style or lifestyle sway your judgment. Beneath the bad décor or messy rooms, these homes may actually suit your needs and offer you a structurally sound base with which to work. Likewise, don’t jump at a home simply because the walls are painted your favorite color.
Mistake 5: Failing to familiarize yourself with the Neighborhood before making an Offer
Check out the neighborhood you’re considering and ask around. What amenities does the area have to offer? For example, are there schools, churches, parks, or grocery stores within reach? Consider visiting schools in the area if you have children. How will you be affected by a new commute to work? Are there infrastructure projects in development? All of these factors will influence the way you experience your new home, so ensure you’re well-acquainted with the surrounding area before purchasing.
Mistake 6: Making an Offer based on the Asking Price, not the Market Value
Ask your Realtor for a current market analysis. This will provide you with the information necessary to gauge the market value of a home, and will help you avoid over-paying. What have other similar and comparable homes sold for in the area and how long were they on the market? What is the difference between their asking and selling prices? Is the home you’re looking at under-priced, over-priced, or fair value? The seller usually receives a market analysis from his listing agent / Realtor before deciding upon an asking price, so make sure you have all the same information at your fingertips.
Mistake 7: Failing to have the Home inspected during the Period before Closing
Buying a home is a major financial decision that is often made after having spent very little time on the property itself. A home inspection performed by a competent and reliable company will help you enter the negotiation process with eyes wide open, offering you added reassurance that the choice you’re making is a sound one, or alerting you to underlying problems that could cost you significant money in both the short and long-run. Your Realtor can suggest reputable home inspection companies for you to consider and will ensure the appropriate clause is entered into your contract.
Mistake 8: Not knowing and understanding your Rights and Obligations as listed in the Offer to Purchase
Make it a priority to know your rights and obligations inside and out. Your Realtor can walk you through the paperwork. A lack of understanding about your obligations may, at the very least, cause friction between yourself and the people with whom you are about to enter the contract. Wrong assumptions, poorly written/ incomprehensible/ missing clauses, or a lack of awareness of how the clauses apply to the purchase, could also contribute to increased costs. These problems may even lead to a void contract. So, take the time to go through the contract with a fine-tooth comb, making use of the resources and knowledge offered by your Realtor and possibly your lawyer specialized in real estate. With their assistance, ensure you thoroughly understand every component of the contract, and are able to fulfill your contractual obligations.
Mistake 9: Not recognizing different Styles and Strategies of Negotiation
Many buyers think that the way to negotiate their way to a fair price is by offering low. However, in reality this strategy may actually result in the seller becoming more inflexible, polarizing negotiations. Employ the knowledge and skills of an experienced Realtor. He or she will know what strategies of negotiation will prove most effective for your particular situation.
Mistake 10: Underqualified Real Estate Agent
The typical housing market, the so-called mass-market with typical average values around $150 to $350k, is much different than the luxury housing market where properties run from the $400’s to multi-million $, so your run-of-the-mill real estate agent likely isn’t experienced enough to help you in your quest for a high-value asset luxury property. A qualified agent / Realtor that specializes in high-value and luxury real estate understands the valuation of high-end properties and his or her experience can find the right property for your needs, actively supporting you during the purchase process, and assist you with high-priced negotiations.
Michael Turwitt has long represented buyers and sellers in the purchase of fine properties and high value assets. Specialized in extraordinary quality homes and luxury property, Michael Turwitt enables clients to successfully navigate the complex North East Florida – First Coast Real Estate Market. For more information, visit www.turwitt.com