Question

When buying a house most buyers focus on the real estate and not the real property. First what does this mean and how can it create any potential problems.

Answer 1

Buying a home is a very emotional process. If you allow those emotions to get the best of you, you may fall victim to a number of common homebuyer mistakes. Since homeownership has many far-reaching implications, it's important to keep your emotions in check and make the most rational decision possible.

But unfortunately, many people do things that prevent them from achieving their dream home and focus mainly on real estate aspects alone like cashflows, asset value etc. So they end up with some potential problems rest of their life.

Key considerations required,

• Before you start house shopping, be realistic about what you can afford, and tailor your search accordingly.
• Use a real estate broker or agent.
• Get pre-approved for a mortgage.
• Downplaying flaws could be a costly mistake, as could overestimating your ability to play handyman by yourself.
• Jumping in too fast or waiting too long to put in an offer are both risky in terms of cost and what kind of property you might end up with.
• Don't overbid for fear of losing out, as it can cause problems with the appraisal, with the mortgage, and with reselling the house down the line.

  Once you've fallen in love with a particular place, it's hard to go back. You start dreaming about how great your life would be if you had all the wonderful things it offered, like the lovely, tree-lined streets, the jetted bathtub, the spacious kitchen with professional-grade appliances.

  However, if you can't or won't be able to afford that house, you're just hurting yourself by imagining yourself in it. So, to avoid temptation, it's best to restrict your house-shopping to properties in your financial neighborhood. If you end up looking at places that are outside your price range, you'll end up lusting after something you can't afford. That can put you in the dangerous position of trying to stretch beyond your means financially or cause you to feel unsatisfied with what you actually can buy.

  Start your search at the low end of your price range. If what you find there satisfies you, there's no need to go higher. Remember, when you buy another Rs.25 lakh worth of house, you're not just paying an extra Rs.25 lakh; you're paying an extra Rs.25 lakhplus interest, which might come out to double that amount or more over the life of your loan. You may be better off putting that money toward another purpose.

  Skipping Mortgage Pre-Approval

  Make sure to be pre approved for a loan before placing an offer on a home or even before you go house-hunting in earnest. If you don't, you'll be wasting the seller's time, the seller's agent's time, and your agent's time if you sign a contract and then discover later that the bank won't lend you what you need or that it's only willing to give you terms you find unacceptable. The pre-approval process can also help you locate the aforementioned financial neighborhood for your house-hunting expeditions.

  Not Shopping Around

  While you should be realistic in your search, and willing to compromise to some degree, don't cave on important things.

  For example, don't get a two-bedroom home when you know you're planning to have kids and will want three bedrooms. By the same token, don't buy a condo just because it's cheaper than a house if one of the main reasons you're over apartment life is that you hate sharing walls with neighbors. It's true that you'll probably have to make some compromises to be able to afford your first home, but don't make a compromise that will be a major strain.Being open to continuing your search will save you from making rash decisions you might regret later.

  Not Using an Agent

  The majority of buyers roughly 87% bought their home through a real estate agent or broker, according to a survey from the National Association of Realtors.

  Overlooking Important Flaws

  Look for homes whose full potential has yet to be realized, especially if you're on a strict budget. The bump in equity from your upgrades will help you to move up the property ladder.

  That being said, if you're going to buy a house that needs work, don't buy a fixer-upper that's more than you can handle in terms of time, money, or your own ability. For example, if you think you can do the work yourself then realize you can't once you get started, any repairs or upgrades you were planning to make will probably cost twice as much once you factor in the labor and that may not be in your budget. Not to mention the costs involved to fix anything you may have started and replace the materials you wasted. Honestly evaluate your abilities, your budget, and how soon you need to move before purchasing a property that isn't move-in ready.

  Ignoring the Neighborhood

  Don't just focus on the residence look at the surrounding area. It's impossible to perfectly predict the future of your chosen neighborhood, of course, but inquiring about or researching its prospect now can help you avoid unpleasant surprises down the road.

  Some questions you should ask include:

• What kind of development plans are in the works for the neighborhood?
• Is the street likely to become a major street or a popular rush-hour shortcut?
• Is there talk of a bridge or a highway to be built very nearby in five years?
• What are the zoning laws in the area?
• Is there a lot of undeveloped land? What is likely to get built there?
• Have home values in the neighborhood been declining or rising.

In short, when it comes to buying a new home, be realistic, take your time, don't act on impulse, and, ultimately, make a home-purchase decision that's good for both your feelings and your finances. However, you have to balance the need to make a quick decision with the need to make sure the home will be right for you.