“Let the buyer beware.” This disclaimer continues to warn consumers of all kinds of products. It is of paramount importance, however, for buyers in real estate, as there are a number of factors that could turn a property from a dream purchase into a waking nightmare.
While there is a mountain of advice on this topic, there are key pointers that buyers should keep top of mind. To that end, 15 members of Forbes Real Estate Council shared their wisdom with prospective buyers to ensure they stay shrewd and wary throughout the buying process.
1. Beware Of Settling For A Property
If there is one thing that I would warn all buyers in the market right now of, it would be settling. All real estate purchases involve a certain amount of compromise when it comes to a buyer’s must-haves. However, with the frenzied market we have in most cities right now, many buyers are feeling pressured to move too quickly and end up settling for a lesser home than they set out to buy. – David Bolinger, The McDevitt Agency
2. Don’t Get Caught Up In The Frenzied Market
The last time we saw something similar to this market was Q1 and Q2 of 2018. With the summer season, we inevitably see more inventory and, unfortunately, higher interest rates. Those factors, along with higher prices, typically soften the market a bit, so it may not be wise to make crazy offers right now. – Brad Le, Compass
3. Don’t Overpay For Your Property
Buyers must be very careful not to overpay for their property in an overheated market with very low inventory. Waiving all contingencies and not doing a full inspection is asking for trouble and will lead to disappointment in many cases down the line. – Andreas Johansson, Berkovitz Development Group LLC
4. Cap Your Search A Percentage Under Your Budget.
Because so many homes are receiving multiple offers in this market, I am recommending that my buyers cap their search 10 to 20% below the top of their budget. That way, they have room to negotiate and beat out the competition. Otherwise, if they find the perfect home at the top of their budget, they may not be able to win when other offers drive the price up. – Jennifer Anderson, Anderson Coastal Group
5. Remain Grounded In What You Are Able To Afford
When navigating a highly competitive market, it’s important for buyers to remain grounded in what they’re willing and able to do. Buyers who are unprepared will end up making quick reactive decisions. In order to avoid buyer’s remorse, be sure you’re clear on what you can afford, what your risk tolerance is and what negotiation strategies you’re comfortable with. Communicate this with your agent – Michelle Risi, Royal LePage Connect Realty
6. Consider Ramifications Of Waiving Contingencies.
Buyers need to consider the potential ramifications of waiving all contingencies up front. In a frenzied, multiple-offer environment, buyers can be too focused on winning the bidding war at all costs. Contingencies exist for your protection so you can investigate the property and feel good about your decision to buy it. Please remember to think long and hard before surrendering your rights too soon. – Tara Hotchkis, Compass
7. Understand How A Property Would Fare In Climate Change
Buyers today need to take into consideration how a property would fare in the face of climate change. With rising sea levels, drought, wildfires and more, it’s more important than ever to be aware of how susceptible a property is to natural disasters. Not only are these matters of personal safety, it also affects a property’s resale value in the future. – Ron Costa, The Eighty Two Group
8. Be Cognizant Of Costs After Purchase
Homeownership is a journey with ongoing responsibility and experience. The responsibilities, costs and enjoyment don’t end when you buy the home; that is when they begin! Be both cognizant and wary of your likely costs after you purchase. Repairs and renovations always take longer and cost more than you think, and property taxes and materials are subject to inflationary pressures too! – Michael Thomas Chambers, Chambers Theory
9. Budget For More Than Just The House
Interest rates are low, and it is very enticing to buy a home before prices go up, which they likely will. Income security, budgeting for lifestyle and retirement and having a larger safety net are important considerations before buying a home. – Chris Bounds, Invested Agents
10. Don’t Waive Inspections
Buyers are waiving inspections in order to get deals. Inspections are a key part of discovery and can identify many costly issues down the road. It’s a sellers’ market in most cases, but buyers need to be careful of what they are stepping into. – Ken McElroy, MC Companies
11. Be Aware Of Risks
Buying in a sellers’ market means that buyers have a lot of competition. This can open up increased risks, since they may not have time to do their due diligence to the same extent they would in a slower buyers’ market. My advice is to be aware of the risks when you’re moving too fast as a buyer. – Kevin Markarian, Marker Real Estate
12. Wait If You Can
As a commercial real estate broker, I advise clients every day on buying versus leasing. With historically low interest rates, financing is favorable, but we are experiencing the beginning of a downturn, so values are on the decline. If the need is urgent, take advantage of the low interest rates, but if you can wait, I advise sitting on the sidelines and waiting for this market to play out. – Jonathan Keyser, Keyser
13. Identify And Consider All Factors
It all depends on several factors, like the reason for buying the property, location, local environmental factors, city data (including crime, job growth, schools and support services), as well as the things you need to support yourself, your family or your business. All these factors are very important to consider. It is common, as buyers are getting outbid to go to undesirable areas – Chander Mishra, Blue Ocean Capital LLC
14. Don’t Obsess Over The ‘Top Line’ Number
Be wary of being told you are overpaying for a property. If you have a long-term view toward wealth development and the region you live in has a history of appreciation, the sooner you can get into the market, the sooner you begin building equity. Of course, you need to be able to afford your mortgage payments each month, but don’t obsess about the “top line” number of your home purchase. – Megan Micco, Compass
15. Don’t Be Caught Flat-Footed Chasing A Deal
Reverberations from Covid-19 are still playing out, and the surge in liquidity has many market participants looking to park capital regardless of the particulars of the deal. Do not be caught flat-footed chasing a deal; the groups you’re competing against may not be using the same metrics such as market value. Banks rely on market value, and if markets crash, that is the benchmark you’re held to. – Charles Argianas, Argianas & Associates, Inc.