Top Mistakes By First Time Home Buyers & Those building New home

Building and buying a new homes is extremely exciting and can be intoxicating at times, especially when it’s your first time. Whether you’re building your very first new home or buying a pre-existing one there are a lot of very important factors to consider. It’s easy to be lured in by the snazzy granite colors, different trim options, hardwood floor species and all the different types of stains. I mean who wouldn’t go a little crazy. First time home buyers buying an already built older home or those building with one of the large national tract home builders should be careful what they are doing, and that’s where an experienced Charleston SC real estate agent can help. While looking at homes that are completely perfect from top to Contractors in Charleston SCbottom, you may begin to rationalize a larger purchase than you had originally planned for – “If I am going to have my house I might as well love what I am in, and besides the additional $50,000 isn’t that much more money if I am going to be hear at least 15 years”. Meanwhile 75% of home owners live a home less than 7 years.

1.) OVERSPENDING – Before even considering going out looking at homes you need to work out your budget and what you can reasonably afford. Reasonably, being the key word here. For one, no {good} agent is going to show you homes without you having the financing part worked out first anyway, but most importantly knowing how much you can truly afford is ideal. There are plenty free online mortgage calculators.

Meet with one of the hundred Charleston SC mortgage lenders or national, but at least talk with two minimum and make sure you’re prepared to know what it takes to get a mortgage approval, and what you can comfortably afford. Having a pre-approval in hand when making an offer will strengthen your negotiating power because the seller knows you are serious.

2.) BE REALISTIC – If you just got out of grad school and have student loans, then you need to base your mortgage on what it is you have for actual income today, don’t assume that you will be earning much more money in a year or two, so you can afford a larger payment. No one can predict the future, and if you think you can just talk to your parents about the great depression or the great recession of just a few years ago, and how that through people’s life into a tailspin. 

3.) NOT ACCOUNTING FOR INSURANCES, TAXES, HOAS, AND REGIMES – Renting is SO much different than owning, because when you rent you just make one payment, and in that payment is the landlord’s property taxes, HOA dues, and insurance(s) costs that you pay. Now you see why owning is better than renting. Homeowners insurance and property taxes very based on your geographic location. The S.East coast and here in Charleston SC has notoriously high homeowner’s insurance rates, where they average $161.08 per month due to the ever present risk of hurricane’s, and flooding. Don’t worry there are ways to reduce you home insurance premiums. In Idaho and Wisconsin, rates are a bit lower, averaging below $50 per month, according to Value Penguin. Property taxes average higher in New Jersey, New Hampshire, Texas and Wisconsin and they’re lower in Louisiana, Hawaii, and Alabama. 

Then on top of all of those costs, if your down payment is less than 20 percent of the selling price, you may end up paying an additional cost — private mortgage insurance (PMI) — which is basically insurance for the lender in case you default on your loan. Unless you are a veteran who can qualify for a VA loan where there it is is 100% financing, most people have to put money down.

4.) FAILING TO PROTECT YOURSELF – Home inspections provide you with some protection. The inspector will be able to find problems that you can’t and you want to know these problems before you sign on.During your house hunt, you may find a house that looks great at first glance. Then, as you walk through a few of the rooms, you notice problems with the house — maybe the floors squeak or the kitchen island is off-centered. After walking through the house, you come to realize that someone simply put lipstick on a pig, and this house is in questionable shape and that’s why a home inspection is SO important.

Contingency clauses also offer a form of protection. You might be saying to yourself that’s my agent’s job to know that stuff. Yes, but so many times a prospective home buyer will fall in love and disregard what their agent advises to put in the contract such as “contingent upon acceptable home inspection”, or your agent wants the seller to pay for a home warranty. That’s where YOU as the buyer get yourself in trouble, because you will want to waive those clauses so you don’t lose the home. 

That brings us to #5

BEING NAIVE & PARANOID – Some first-time home buyers are naive. Overly optimistic, they think nothing could possible go wrong. If a home has a few problems, they view them as easy fixes and are unrealistic when it comes to the cost and time it takes to fix up the home. This is where you should find a contractor to walk a home with you to tell you the true costs of the “easy fixes” so you avoid getting yourself into trouble with a money pit. Some naive buyers will move to a neighborhood on the wrong side of town, forgetting that you can fix up a house, but you can’t change your neighborhood or location without moving.

They’ll submit low-ball offers and then show frustration when they are consistently rejected. Paranoid buyers don’t trust real-estate agents, and may even try to buy their home without an agent, which is generally an unwise choice.

 

 

Do’s and Don’t of Buying Tract Home | Be Careful When Building with Large National Builder

It is the American dream to be a homeowner, and most families likely prefer to own a new home vs one already lived in. Don’t get me wrong that doesn’t mean there is anything wrong with a pre-owned home, but just like new cars knowing it’s brand new just gives you a warm and fuzzy feeling.

If you want a new home there are a few things to consider before you get started with your decision, as there are different types of new home construction. You could obviously build one yourself by hiring your own builder, purchasing a spec home from a local spec builder, and the most common is buying one from a large national tract home builder. Most home buyers readily figure this to be the best and most simple option to getting that new home. However, there are some pro’s and con’s to buying from one of these large national builders like: Beazer, Pulte, Centex, DR Horton, or Lennar.

National builders’ profits are built in a few different ways, and by knowing some tips will save you a lot of money.

1.)  – use a real estate agent to represent you in your purchase, an experienced agent will know the tricks of saving you money. Do not go to the development without an agent. You will get yourself in trouble and cost yourself money. That’s exactly what these builders want you to do, to be that unsuspecting and naive buyer who talks way too much and “shows their cards”. 

It’s best to wait until you can have someone accompany you to see the model home. A real agent knows all the tricks, smoke, mirrors and sales pitches that the onsite agents try to feed visitors who come to see their community. Don’t forget having a buyer’s agent there with you does NOT cost you ANYTHING. In fact having an Charleston SC real estate agent will Save you money and protect YOUR interests not the builder’s.

These large national builders make their money from how they purchase the dirt / land they develop the neighborhood on. So if they are lucky they can charge a premium on each lot once they have subdivided the dirt. The goal of national builders is to buy ALL the land they can get their hands on so you as the buyer are forced to purchase from them.

What’s a Lot Premium? Lot premiums are when builders add an additional cost for the lot they would build your home on. So for instance Oyster Point Mount Pleasant   by DR Horton is a wonderful community and like all builders what they advertise for the prices of the homes are the price WITHOUT the “lot premium”, So really the cost of the home is probably $20,000 more before you choose finishes or upgrades.

 

NEW CONSTRUCTION HOMES IN CHARLESTON SC

Mt Pleasant SCDowntown CharlestonJames IslandDaniel Island SCSullivan’s IslandIsle of PalmsJohn’s Island – West AshleyFolly Beach

 

Another way they make their profit is markups on materials. Honestly, there isn’t much you can do about that. They buy it in bulk from their suppliers and then tack on additional profits from what they paid for it. They have the cost of these materials built into the base cost of the house so there really isn’t any reason to try to negotiate those from the base price. The builder knows exactly what it costs them to build each floor plan. For example their cost may be $90 a sq ft to build, and the base price they sell to you without upgrades may come to $106 sq ft. Notice I said upgrades.

That’s where they get you.  Upgrades and changes to the base plan. They will offer their “standard” package which usually consists of a base floor plan, “builder grade” materials and fixtures. Builder grade means cheap low-end. Who really wants that stuff? – and trust me they know that. So you’ll want to ask for a different, and nicer product, and who wouldn’t. DON’T, get suckered in by this. For instance you want nicer hardwood floors, or you want a nicer trim package like crown molding, or a screened in porch they will charge you thousands of dollars for something that might cost under a thousand. For example: I had a client build a large nice (semi-custom) home with a large national builder, and he wanted a fence built in his backyard. The builder was going to use the same fence company as my client to build the fence for him and the builder was going to charge my client $4800, but my client hired the same fence guy himself and got it built for $2500. For the SAME exact guy and plan. You can save a lot of money just by having them build the house with the base, standard materials and then do the work later yourself or hire someone else to come back and do it. I know it seems so much easier to “just let them do it”, and it is, but if you are pinching pennies, and want to be smart trust me it’s not worth it. That additional $10,000 or $15,000 financed over the life of you owning the home will cost you so much more money.

Conclusion

Buying a new home is very exciting, but take a real estate agent with you if you are interested in a new home development by a large tract builder. Two, try not to get swept up in the “extras and upgrades”, as they are their to sucker you into overpaying for things that just aren’t worth the drastic upcharge.