Sumit and Payel Sengupta, a newlywed couple, are hunting for what will be their first home together. But their minds are riddled with the usual concerns that first time home buyers have — “Is this the right time?” “Where should we buy?”; “How big the house should be?” and so on…
The thought of buying a home excites most first-time home buyers. But, this euphoric feeling can trigger catastrophic mistakes if they are not being careful. Due to a hurried decision, many first time home buyers get making wrong decisions or end up paying more.
This document is for home buyers scouting for their first dream home. The article has common errors many first time home buyers make. These are terrible mistakes to avoid at any cost. Here is a list that will cover you from most home buying blunders.
The Mistake of Not Assessing the Financial Position
Entering a home transaction demands long-term vision. If you are intending to take a housing loan, map your financial status with a judicious approach. A home loan will need an upfront down payment, plus there will be regular EMIs you need to pay for several years.
Since housing finances are for a long-term, you will need financial discipline to repay the loan. Your earlier loan repayment track record can act as a tool for self-assessment. Home loans have drained many home buyers, leaving them bankrupt, and without a roof. Be careful.
Go for a home loan if you have backup funds and a steady flow of income. Understand that your home is brick and mortar, a fixed investment with low liquidity. It cannot help you in dire times. You will need liquidity in form of shares, FDs, and cash to cover immediate emergencies. Do not invest every single penny in your home.
The Mistake of Bypassing the Home Appraisal
A property can look brilliant on marketing brochures or newspaper ads. But it’s not always the case. Many home buyers make the mistake of not seeking professional advice. Also, they do not realize that getting the property appraised by an expert can be profitable in future.
You should always deal with highly reputed and professional marketing agents and avoid small time brokers. The professional is the only neutral party who can give an impartial view. A property appraisal by an expert comes handy in getting bank loans and at the time of selling. The appraisal gives you leverage while negotiating with the builder.
The Mistake of Overlooking Hidden Costs
Real estate deals have hidden costs. Do not go by advertisements. Advertisements offer the naked pricing excluding stamp duties, registration fees, etc. Never book a property based on the price displayed in an advertisement. Before investing, be sure you can meet the added expenses.
The Mistake of Not Considering the Property Resale Value
First time home buyers often ignore the resale value of a property when buying. Blame it on the thrill of owning the first home. A property is a long-term investment that can give you decent returns. You can sell the property for good money if you need cash. You can get regular annuity payment during your old age through a reverse mortgage from a bank. Not considering the resale value of a property is a grave mistake to avoid.
Though selling the property may not cross your mind at the time of purchasing, many factors can trigger the sale. You might have to sell the property for reasons such as job transfers, marriage, or a need for relocation. Nobody wants to end up on a losing side. Considering the resale value while buying the property can make sure you gain from your hard earned investment.
Consider properties that have a widespread appeal. Look for major infrastructure developments coming up in the locality. Check the property’s connectivity with public facilities, airport, rail station, bus terminus, and metro. These factors boost resale values. Talk to real estate experts and ask them the projected growth over the next three to five years.
The Mistake of Not Doing Research on Real Estate Market Trends
Real estate market trends are dynamic. They keep evolving. Earlier, it was a common belief that value of a property within a city appreciates more than those outside city limits. Of late, a shift is visible in this pattern. In terms of capitalization, properties in many emerging suburbs and satellite towns are offering more return on investments. Do a complete market research before investing in property.
The Mistake of Not Checking Property Documents
This is a fatal mistake the first time home buyers make. The value of a property is zero without valid documents. Check the agreement between landowner and builder. Find out whether the property has an outstanding loan. Scrutinize the latest tax paid receipt and the sale deed. Make sure the sale deed is in the present seller’s name. Inspect the plan sanction document and NOC from Electricity Department, Pollution Control Board, Water Works, and Airport Authority.
There are many websites that cater a comprehensive checklist of the documents to verify. If you are taking a bank finance, the bank’s legal cell will verify the property documents. But, no harm in double checking the documents of a property you are purchasing.
Ask the seller for a list of expenses. This includes maintenance charges, pest control fees, and other costs you have to bear when you move into your new home. The thumb rule is to set aside one percent of the total property value for yearly expenses.
As a first time home buyer, you may have plenty of reasons to be apprehensive. And, it’s okay. However, if you work with a reputed and trusted real estate company and seek the advice of professionals, chances of making these mistakes are considerably less.