Sometimes the smartest people make the silliest mistakes. In fact, when I worked as an agent in Manhattan, I watched PHDs swoon over apartments they could never afford, and investment bankers talk themselves out of great deals.
Simply put, when it comes to mistakes first-time homebuyers and sellers make, no one has a monopoly on bad decisions.
That’s why we decided to work with our friends over at Compass, Halstead, Leverage Global Brokerage Members, and other prestigious brokerages to help first-time buyers and sellers understand some of the most common mistakes people make when trying to close their first deal.
Special shoutout to our friends over at Wicked+, Compass, Leverage Global Partners, and Halstead for offering such amazing insight for this article.
1. Giving Early Possession of Your Property
Donna Davies, Timothy Real Estate Group, A Leverage Global Brokerage Member
“Never give early possession of a property, always wait until the property is fully closed before possession and don’t allow the buyer to leave any personal possessions at the property. If you do, you may create problems for everyone involved and open yourself up to liabilities and expenses. Always wait until after closing to hand over the keys.”
2. Not Keeping Track of Your Keys
Ann Dashiell, Director, Estates Division, Compass Los Angeles
“When showing a home, hold the house key in your hand at all times. When I first began my career, I was showing a house and I walked outside with my buyer and the door locked behind me. My purse and keys were in the house. Yikes! So embarrassing. Thank goodness my phone was with me and I called for help. Cost me $100 and embarrassment. I now keep the key in my hand.”
3. Overspending on Your Primary Residence
Jennifer Okhovat, Residential and Commercial Realtor, Compass Los Angeles
“One of the common mistakes I find first-time homebuyers making is overspending on their primary residence. Just because a bank or a mortgage broker pre-approves you for a certain amount, it does not necessarily mean you can afford it while keeping the same lifestyle you are living right now.
I think in addition to chatting with a mortgage broker, it is important for buyers to consult with their CPA and financial advisor to discuss affordability in the long term. Also, consider if in the unfortunate event one of the homeowners loses a job, how long can the buyer afford the mortgage? How much money is being set aside for potential future repairs? Home maintenance is expensive, and many people forget about the costliness that the responsibilities of homeownership may bear after they complete the purchase.”
4. Focusing Too Much on Price, & Not Enough on Terms
Lukasz Kukwa, Realtor, Coldwell Banker
“Both Buyers and Sellers always make this mistake and that is always focusing on the money or home that they don’t have yet or never really had, putting the cart before the horse. To clarify, price is a driving point and usually a main subject or concern in a sale but it is not the end all be all.
Sellers always focus on trying to get the best/highest price and buyers focus on always trying to get the best “deal”—not many focus on the terms which make the deal. If purchasing in a competitive market, buyers should focus on submitting a fair market price but more importantly making their terms stronger to secure the deal over another buyer.”
Lukasz is aso a member of Giveback Homes, a non-profit that gives real estate industry professionals a chance to give back to their communities. Check out their website below to learn more.
5. Trying to Save Money by Working With the Listing Agent
Julie Upton, Realtor, Compass San Francisco Bay Area
“Many first-time buyers think that entering into dual agency agreement will help ensure that they get the property they want. In reality, it doesn’t work out that way and often means they wind up overpaying for a property or get a property that has issues.
It is extremely hard for a listing agent to be a fiduciary for both seller and buyer. I have seen several buyers who have wound up overpaying and had less negotiating power by entering a dual-agency agreement.”
6. Trying to Buy Your Last Home, First
Cheryl Eidinger-Taylor, president of ERA Key Realty Services
7. Not Testing Anything & Everything That Can Break
Kleopatra Phili, Licensed Real Estate Salesperson, Halstead Manhattan
“Show me it’s working”—that’s what needs to be said to sellers by buyers before they sign the contract, especially if it’s a re-sale and not a sponsor unit. Ex: if there are in-wall speakers, do they work? If there is a so-called Smart Home system in place and the iPad has been wiped clean by the sellers prior to buyer’s conducting a walk-through inspection, ask the sellers to prove that all systems work BEFORE the buyer signs the contract.
Electronic equipment can be costly to repair or update. The second thing is, if ANY renovations had been undertaken by the sellers, be sure to ask the Board and the Management company: Has this scope of work been disclosed to you and has it been fully approved by you? “Show me the renderings.”
8. Trying to Outsmart the Market With Your Primary Residence
Steven Segretta, Licensed Real Estate Agent, Halstead Brooklyn
Markets can change as can your personal financial situation, so I would recommend not stretching financially or being overly dependent on the market to take you out. I think buyers should tend to look at their primary residence as a place to live as opposed to a financial bet.”
9. Not Understanding Your True Buying Power
Daniele Kurzweil, Licensed Real Estate Salesperson, Friedman Team, Compass Manhattan
”The number one mistake for first-time home buyers is not knowing your true buying power. Many first-time homebuyers are so excited to start looking for a home and set a budget for themselves, without consulting a real estate professional to see if that number is even appropriate.
While a bank might lend you money with a 40% DTI ratio, very few, if any buildings will allow a buyer to have a ratio of more than 25%. First-time homebuyers get swept up in the excitement of it all and forget that just because they think they can afford something that does not mean that others will agree.”
10. Not Staging Your Home to Sell
Dolly Hertz, Licensed Associate Broker, Engel & Volkers Manhattan
“The biggest seller mistake is failure to stage your home for sale by removing personal items and making the tableau as neutral as possible so potential buyers can envision themselves living there. This includes removal of personal items and family photos, painting walls a light, neutral color and removing old carpeting so buyers can see the wood floors, which you’ve refinished for the sale.”
11. Not Pricing Your Home to Sell
James Mgrath, Co-Founder, Yoreevo
“By far the #1 mistake I see first-time sellers make is pricing their home 5-10% higher than its actual value with the expectation that buyers will want a discount. The primary reason this is a mistake is that by pricing too high, you’re creating a mismatch between who sees the home and who would buy it.
Buyers are usually very well informed and if a property is priced right, they will pounce. Especially in a buyer’s market, I would recommend sellers simply price in line with the comps. That way your listing will be in front of the right audience.”
12. Draining Your Savings to Invest in Your Home
Audra Walters, Realtor, Front Porch Properties SC
”Draining your savings to invest in your home. Most first-time buyers assume that this—their own home—is everything they’ve been saving for. So if that requires draining all their savings for the 20 percent down payment, it’s ok, it’s a sound move. It is an investment after all and it means they won’t have to pay for mortgage insurance. But this means that they’re left with absolutely no savings at all.
It’s sensible to always have three to six months living expenses in an emergency fund. Paying mortgage insurance may be an additional hassle and cost, but completely depleting your emergency funds is just too risky.”
13. Not Choosing a Lender Carefully
These lenders lure buyers in with low rates that often have a catch, they never have the response time or service level that a local lender can offer and often hire appraisers that don’t know the market and can make a mistake that costs the buyer their dream home. Also, many listing agents prefer to work with local lenders who they know can close the transaction, and the unknown is too deep with an online lender.”
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14. Ignoring Curb Appeal
Jeff Fisher, Realtor, Property Simple, Arizona
“Don’t forget about curb appeal, which has to do with the visual attractiveness and initial appeal of a property from the outside. This means the condition of the yard, driveway, siding, landscaping and even your mailbox.
If someone were to drive by your home or take a good look at it from the sidewalk out front, what would their reaction be? This is curb appeal—and having great curb appeal is crucial to the home-selling process—because buyers notice! Talk to your agent or just look for yourself—maybe you need to paint the front door and invest in some landscaping”
15. Prioritizing the House Over the Location
Alison Bernstein, Founder & President, Suburban Jungle
“The biggest buyer mistake I see is definitely prioritizing the house itself over the town in which it resides. And should they decide they don’t like where they have landed, to make an additional move can take both a financial and emotional toll on a family.
Selecting the right town is critical to your life and family development. The whole premise of Suburban Jungle is to locate the optimal town for each individual family. The goal is to find you and your brood in a place where the culture and values of the town match yours. You can always trade up or down for a new home; add a 3rd bathroom or renovate a basement.”
16. Skipping the Home Inspection
Molly Franklin, Licensed Real Estate Agent, Citi Habitats Brooklyn
“A common mistake many buyers make is to skip attending their home inspection. Having an inspector adds more than just the peace of mind that the property you are purchasing is sound. The inspection itself also serves as an impromptu crash-course in homeownership.
Seeing how to maintain the HVAC system, understanding the lifespan of your hot water heater, and knowing the age of your roof is empowering—and can save you tons of heartache and added expense down the road.”
Have a first-time fail that we didn’t cover? Share yours in the comments!