In any real estate endeavor, there are common consequences that any investor encounters, even those who have been long in the business. If you are new to investing in properties, or a first-time home buyer, you need to take note of pitfalls that are sure to take place in making your deals.
It is better that you are aware of the common pitfalls occurring during real estate deals. It is even a better way in becoming knowledgeable in the business than relying on success stories of other investors. By knowing the common pitfalls, you have better chances of avoiding them. Some of the most common pitfalls are briefly explained below.
No real estate agent involvement
Some investors want to cut down expenses by not hiring an agent. Then they do their own research, since they are the only ones who know which property is ideal that matches their preferences. Although there is truth to it, not all investors have all the knowledge in dealing with real estate transactions. One needs an expert in the local area where the property purchase would be made. An agent could provide the local area’s buying policies, property details, market trends and other real estate-related legalities and processes.
When one does not employ the services of a certified real estate agent, there are higher risks of stalling a successful purchase deal.
Overlooking the property details
Some investors make the mistake of forgetting to notice all the details of the property. There are some cases of investment deals that have transpired without looking into proper research of title deeds, legal disputes and survey of the land area. These are only a few of the important details that most home buyers only realize after the deal was finalized.
Buying without conducting due diligence
In every financial transaction or real estate endeavor, this detail is usually forgotten. Investors may grab any real estate purchase opportunity without researching if the property is a sound investment. The property may seem superficially a good location or aesthetically stimulating. However, these do not guarantee that they are actual sensible assets. For example, some beach properties are enticing but environmental catastrophes and poor accessibility are only realized when the owner has been there for a few weeks already. It is already too late to ‘return’ the property and too soon to be put back in the market again.
Early reservation fee or deposit down
When investors have found the perfect property to purchase, they cannot let it go. Hence, to fast-track the deal and the property be immediately theirs, an initial deposit or reservation fee is given right away. There is nothing wrong with this. However, some sellers do not allow refunds in case the investors back out. Hence, more waste of finances unfortunately arises.
In these days of real estate crises nationwide, the principal theme in property investment is ‘the cheaper, the better’. Although budget is an important factor, purchasing less expensive properties may not seem such a good idea. Remember that there is always a catch. Cheaper properties are more vulnerable to further future expenses due to unseen repair or reconstruction needs, and other unexpected costs.
Other deals may also seem the better ones when they are offered in cheap prices. However, these prices are only the initial prices. Especially for previously owned properties, the seemingly affordable offer may exclude pending property taxes, land area disputes and personally guaranteed mortgage loans.
Mortgage payment problems
Paying mortgages is an intrinsic part of investing in real estate. There are alarming data on delinquency rates for various mortgage loans, from constructions loans to residential homes loans.
According to several data checker companies and mortgage brokers associations, mortgage non-payments range from 13.8 percent to 21.7 percent in several states which occurred only within this year’s second quarter. The delinquency rate is expected to continue to rise up to 7 percent more by the end of the year. You need to be cautioned that despite the noticeable decrease in home prices for most real estate markets, the mortgage rates are still almost as high as the time before the current real estate crises.
Nowadays, investing in real estate must be taken with watchful precautions. However, you should not limit yourself by not purchasing any. These real estate pitfalls may serve as knowledge gain for you to make wiser purchasing decisions.