The Top 5 Things Buyers Need to Look Out For - Mortgage rates remain near all-time record lows, and home prices are still affordable. Both of those things have prompted many prospective buyers to rush through the house-hunting process in hopes of making a quick purchase before these great deals come to an end. But that's not always a good idea! As tempting as the low interest rates can be, you shouldn't snap up the first house you see. Remember, not every home for sale is a good buy, so potential homebuyers need to be very careful before purchasing a home. Here are 5 red flags you need to be on the lookout for while you’re house-hunting:
1. Owners that don’t actually own the home
This seems like a silly question to ask, but sometimes a homeowner will try to sell the home because they know that the bank is about to foreclose on it. Although purchasing a home in short sales and foreclosures can be a great deal, if the home is not eligible or purchaseable, you may be making an offer to the wrong person! In other words, if the bank has already seized ownership of the home, the homeowner cannot sell it because it no longer belongs to them.
2. A bad neighborhood
You're not just buying a home; you're buying the neighborhood as well. In other words, make sure that the home you want to buy is in a safe and thriving community. If the neighborhood is filled with foreclosures and short sales, they will ultimately bring down the value of the home you intend to buy. They’re also a sign that the community could be on the decline, so this should raise serious red flags. A spokesperson from the National Association of Realtors also suggests asking local police for a crime report for the neighborhood and surrounding areas.
3. Anything that stands out – in a bad way
As you take a tour of the home, take notice of any type of damage to the home. This could be structural damage, termites or other pests, water damage, exposed electrical wiring, asbestos or mold. Here’s a simple rule to follow – if you can see any physical damage to the home that you think could even possibly be harmful to you and your loved ones, don't buy the house!
4. An appraiser’s antennae that get perked up
Since you may not be able spot everything that could potentially be wrong with a home, you should always hire a licensed home inspector to do a complete inspection. It's best to have an inspection done before making an offer on the home, but if you do make an offer beforehand, make sure the paperwork says that it is contingent on a successful home inspection. That way, if the inspector finds something, you can renegotiate your offer with the seller or leave the house behind altogether. Cosmetic and minor damages can be overlooked, but any repair that's going to cost 2-3% more than the purchase price of the home should be an immediate red flag.
5. Numbers that don't add up
If the property appraisal value is significantly less than the price you agreed to pay, you should reconsider your offer. Remember, your lender will only loan up to the appraised worth. So, if you agreed to pay $100,000 for a home that was appraised at $75,000, you'll likely have to come up with the other $25,000 on your own. If you're okay with that, proceed with the purchase. But if you're uncomfortable with the financing, you should probably keep looking for another home to buy, and leave that one behind.
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