How to Avoid the Most Common Mistakes Made by Homebuyers
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This is a special edition of your Money Briefing for Friday, April 21st. I'm J.R. Whelan for The Wall Street Journal. Welcome to the fourth episode of our series, Under Contract, Your Guide to Home Buying. On today's episode, we're talking about common mistakes that can short-circuit the home buying process, or in some cases, result in a disastrous experience.
It can be heartbreaking for a prospective home buyer, particularly for a young family that's buying a home for the first time. You've worked very hard to bring together the financing to make sure that you have the savings in place as you're approaching that closing date to get an inspection report back or an appraisal back that doesn't quite fit.
One homeowner we'll meet thought she'd done everything right, but still ended up incredibly dissatisfied.
When I first moved in, I just had this feeling that I didn't like it. I couldn't tell why, but I think later I realized it's because the black mold and the asbestos, even though they've been certified that they're now gone, they're clean, in the back of my head, I still feel like it's still there. So I didn't feel safe.
We'll hear more of her story in a moment. But first to discuss mistakes and setbacks that can often plague the home buying process is Sam Chandon, founding director of the Chen Institute for Global Real Estate Finance at New York University. Hey, Sam, thank you for being with us.
Delighted to be here.
So Sam, buyers have been in fierce competition with each other for several years now. What are the biggest mistakes you see and how they make the initial approach to the buying process?
The first thing that we see is that buyers may misjudge where we are in the real estate cycle. And for most households, this is going to be the most significant investment that they'll ever make. And so understanding fully that where we are in that real estate cycle, whether or not there's the potential for prices to decline significantly over the course of the coming months, over the coming years, and what importantly may happen with the cost of financing, the mortgage rates, both very, very critical for prospective buyers, particularly first-time buyers, to be thinking about when they're entering that market. But overall, we can reasonably expect this is a long-term investment.
What common homebuying mistakes are introduced at the episode’s start?
And so timing it correctly becomes terribly important, not only when we're thinking about our timing in the real estate market, but also in thinking about where we are in our household's life cycle. It may be the case that a change of job in the next couple of years will require that we relocate to another city. It could be that we're expecting a significant change in terms of the size of our household. It could be that as an early stage household, I'm expecting to start raising kids. It could be as a late stage household that I'm expecting to find myself as an empty nester. at some point in a couple of years. But thinking about these two life cycle issues, where are we in the real estate cycle? And what does that mean for prices?
What does it mean for borrowing costs, given that this is a long term investment? But on the other side of it, also thinking about where I am as a household, and what my long term needs are going to be buying in a way that anticipates those long term needs.
All right, so let's focus in now on the point where a prospective buyer finds the house they'd like to buy. It's an accomplishment to get to that point, but they probably have competition.
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Chapters
4 chapters
1
What is the main topic discussed in this episode?
0:00–2:42
2
What common homebuying mistakes are introduced at the episode’s start?
2:42–11:04
3
How does market timing and the real estate cycle affect first-time buyers?
11:04–13:48
4
How should buyers assess household life cycle and long-term needs before buying?
13:48–14:29
Speakers
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