Three Classic Mistakes of First Time Home Buyers

As an HGTV-addict, I sometimes want to shout at the featured homebuyers on shows such as Property Virgins, "ignore the light fixtures, they can be easily replaced!" or "don’t pay any attention to the paint color, you can fix it in an afternoon!" and "listen to your home inspector when he says that water damage could indicate serious problems!" Homebuyers, especially those with little experience, are prone to making all kinds of mistakes, from ignoring catastrophic problems (water damage) and obsessing about details that barely matter (wallpaper). Today, with low housing prices in many areas and equally tempting interest rates, more newbies are being lured into the market. First-time buyers now make up 45 percent of the market, up from 34 percent in 2007. But are they equipped to make the right choices? Here are three classic mistakes they make:

1) Being turned off by problems that are easily fixed. Did you know that almost nine in ten first-time home buyers are looking for move-in ready homes? Other first-time buyers want to live near shops, their work, and highly-rated schools. While location isn’t negotiable, many smaller fixes are, such as a dirty carpet or scratched up hardwood floor. Buyers sometimes focus on things like carpet, but that’s really a renters mentality, they forget that they can make all these changes themselves. Buyers should be asking their real estate agent for help understanding how costly fixes will be, and to grill the home inspector, as well. 

The lesson: In this buyer-friendly market we are in now many first-time buyers can satisfy their high standards.  High standards can work to your advantage, but don’t forget that some fixes are relatively easy (and cheap), such as cosmetic makeovers.

2) Overlooking hidden costs. Home ownership brings a bunch of different expenses, from closing costs to appliance maintenance to homeowners insurance.  Homes might not be as cheap as they look, especially if you buy a distressed property that hasn’t been well-cared for in recent years. Home maintenance typically costs one to three percent of the purchase price, which is as much as $9,000 a year on a $300,000 home.

The lesson: Since there are bound to be plenty of unexpected costs during that first year of home ownership, leave plenty of room in your budget to absorb the extra expenses.

3) Failing to budget for DIY-projects. Not so long ago, DIY (do-it-yourself) television shows let first-time home owners believe that anyone could fix-up their home. More recently, the art of fixing up houses has fallen out of favor, and the reason appears to be financial. The DIY (do-it-yourself) home improvement market has fallen 21 percent in the last 10 years.  While about one in four would-be-DIYers say they want to start on a major renovation, they simply can’t afford it right now.

The lesson: When purchasing a home, reserve some cash for needed DIY projects during the first year of home ownership.  Padding your budget can prevent late-night panic attacks when the dishwasher starts leaking all over your new floor.