UPDATE: This article is being updated on 9/10/2016. It is still relevant today with a few exceptions, which I have notated.
I received an e-mail newsletter from the Illinois Association of Realtors® and there was an interesting list from a local agent, Mark Nash. I'd like to quote his Top Buyer Mistakes and give my opinion after each one:
Bought properties to flip at top-of-market prices
I still can't figure out why buyers do this. Maybe if a buyer timed the purchase around the beginning of the seller's market 3-5 years ago, they might have seen a substantial profit. In our local market things are slowing and I've already seen homes purchased and quickly put back on market at a higher price (after some renovating) sitting and not selling.
UPDATE: We are still seeing flips but I do see a lot of mistakes. I've seen flip homes that have such bad floor plans they're almost unlivable. Teeny tiny bedrooms that today's buyers don't want, cape cods without dormers in the upper bedrooms with such sloping ceilings that you can't put much furniture in, bad locations and the list goes on. I always wonder if the flippers made any money on these bad investments.
Utilized interest-only mortgages, paying top-of-market prices
I consider this to be two separate issues. I find nothing wrong with interest-only mortgages but they should be at a fixed rate. For the first years of a mortgage you aren't building much equity and you can always pay towards equity (find out how to properly do this with your mortgage provider) if you want to. In the past seller's market if you wanted a property you had to pay top price or you probably didn't have a chance to get it so not everyone had a choice in paying top dollar. Is it just the combination of interest-only and top dollar? Again, it was the market at the time and if you fully understand what an interest-only mortgage is all about and you preferred that, I see nothing wrong with it.
UPDATE: Interest-only mortgages pretty much came and went. They never held traction. It seemed like they were just another vehicle to get people into homes they couldn't afford. This was when we made the joke that if you had a pulse, you could get a mortgage.
Overlooked resale characteristics, especially in upgrades in new home construction
No update needed, still relevant today. I fully agree with this one and I see it in all markets. I always try to have my buyers look into the future when they go to sell the property they're now considering purchasing. Once again, in a seller's market you might have to settle for something less than you anticipated because of the lack of inventory. But so many people building a home do not look at a future sale and either don't choose important upgrades that will help sell their property for top dollar down the line or make very personal choices that might actually hurt their home's sale ability in the future.
Skipped performing a home inspection (especially before some markets shifted away from seller's market)
This would be a mistake, but I rarely see buyers today not having home inspections. I always give my buyers the opportunity to have a home inspection in the contract, even if they tell me at that point they don't want one. Again, during the active seller's market many were opting-out of inspections to give them a better chance of getting a home when up against multiple contracts, only to find out there were problems after closing.
Misinterpreted developers giveaways (which usually signal a softening market)
I really don't understand what is meant by "misinterpreted" here. I guess it would be teaser rates provided by a developer's mortgage provider, upgrades that aren't necessary or less costly than they're made to be? Just be sure you know exactly what you're getting and if it's really valuable and don't choose one builder/developer over another because of perceived value of the giveaways. Do your homework.
Were represented by the same agent as the sellers
No matter how much I try to educate people about this I constantly get calls on my listings where the buyers want to view them through me. Once I talk to them I explain Buyer Representation but some just don't understand. You need full representation. When you work with the listing agent on a property you are not getting that. The best that can be provided is Dual Representation. Find an agent you have built a rapport with and trust and work with that agent to find you properties to view through the MLS.
Didn't read homeowners' association documents
This is mainly for condominium/townhome purchases and also any subdivision that has bylaws. You have the right to get all documents prior to closing so you can review them.
Neglected to request rates of state, county or local transfer taxes paid by buyers at closing
I don't expect buyers to even know to request something like this. This is information that a knowledgeable real estate agent should provide. In our area, most of the towns we work in have seller paid transfer taxes, with the exception of Chicago, where both buyer and seller pay a transfer tax.
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