Buying a new home is an exciting time. There’s a lot to think about, from packing to getting the kids into a new school to making sure your loans and financials are in order. With a checklist of to-dos a mile long, you may feel pretty confident that your ducks are in a row.
But before you get too comfortable, here’s a list of what NOT to do when buying a home, or all your best laid plans may quickly become derailed.
1. DON’T Sign Anything Before Your Attorney Looks At It
New Jersey law requires that real estate contracts are written in plain English, and friendlier language may lead people to mistakenly believe that the contract is not a legal document.
That mistake can have costly consequences. The real estate contract states the key terms of the sale, including the purchase price, expected closing date, the seller’s obligation to make repairs, and more. Once you sign it, the contract is legally binding unless you have your attorney review and disapprove it within the three-day attorney review period.
The attorney review period is standard in every New Jersey real estate contract, but if you haven’t hired an attorney to review it then you are bound to the terms with no ability to change anything.
And if you’ve signed a contract without your attorney reviewing it, you may have agreed to terms that were not in your best interest. Don’t rely on your real estate agent to review it, either. Your agent may be qualified and trustworthy, but a real estate agent is not able to provide you with legal advice.
2. DON’T Wire Funds Without Verbal Confirmation From Your Attorney
You’ve saved up for the big occasion, and you’re ready to wire the funds to close on your new home. You get an email telling you where to send the money, so you do. But your money never shows up for the seller. Instead, the tens of thousands of dollars you’ve worked so hard for and saved for your new home have disappeared into the bank account of some unknown scammer.
We’ve talked about this in more detail here, but the summary is that determined criminals have figured out how to falsify wiring instructions and make them look real enough to fool you into sending them your money.
Once your money is gone, it’s gone. You may never see it again, and we don’t have to tell you what that can do to your plans. So even if you get an email (or letter) from your attorney, real estate agent, or anyone else involved in the sale that looks perfectly legitimate, always take the extra few minutes to call your attorney and get a verbal confirmation.
3. DON’T waive the home inspection
You’ve found your dream home, and everything appears to be in impeccable condition. You have the option for a home inspection but you’re not sure it’s worth the time and money. It seems like a small detail, but forgoing the inspection is a big mistake.
The home inspection will report on the health and functioning of key systems, like heating and cooling, electrical, plumbing and drainage. It will also uncover issues with things like roofing, structure and appliances. If something is wrong, you can address it with the seller and either demand repairs or negotiate the price to compensate.
But once you buy the home, any problems that you don’t uncover beforehand become your problems. You can’t go back to a seller after closing and complain about a malfunctioning dishwasher, for example. Even if it’s a new construction, you never know what kind of deficiencies you may uncover.
4. DON’T Bid On A House Sight Unseen
Not only should you see a house before you buy it, but you should see it more than once. A house is not a sweater or a new handbag. It’s a big investment and there’s no “refund or exchange” program when it comes to buying one.
You’re going to be living and sleeping and cooking and watching TV and perhaps raising a family in that house for years to come. Can you know how you’ll feel about being there without seeing it? Or what the neighborhood looks like from the front porch? Will you have a feeling for how large (or small) the rooms really are or whether that giant electrical tower is visible from your backyard patio?
You should also see the house more than once so you can confirm whether or not it’s right for you. See it in the daytime and during the evening, on a weekday and again on the weekend. The neighborhood activity may be different, or your perspective may change.
5. DON’T Include Personal Items In A Contract
The seller may have agreed to leave you their pool table, chandeliers and barbecue grill, but those items should not be included in your real estate contract. These items have value that can drive up the overall value of the home. When the home is appraised, the appraisal should be based on the value of the house and land only, not the house and land plus “extras.”
And since the home’s appraisal will inform your ability to get a loan, lenders don’t want to see any extras that can affect the appraisal. Nor will they finance the purchase of personal property like appliance and furniture, so you may be asked to remove personal items from the contract. That can mean delays in obtaining a loan.
If the seller has agreed to leave personal property, your best bet is to draw up a side contract to specify these items and avoid any holdups with the mortgage process.
6. DON’T Overbid If You Don’t Expect To Pay It
Currently in Monmouth and Middlesex counties, there are more interested buyers than houses on the market. That means more people bidding on the same houses. If you get into a bidding war and keep upping the ante just to win your dream home, you can run into big problems.
Typically, the seller will accept the highest offer, and if that’s yours, you may feel like it’s your lucky day. But often, bidding wars push the purchase price well over the home’s appraisal. And if you’re planning to get a mortgage, you may not be able to get one unless you can make up the difference between the appraisal and your bid in cash.
You can’t force a seller to lower the price if the house appraises lower than your bid. And depending on the terms of the sale, you can either lose the home, your deposit, or both.
7. DON’T Waive Title Insurance
Buying a house can feel like death by a thousand fees. But some of them pay for important protections, and title insurance is one of them.
Title insurance protects you in the event that the seller doesn’t have free and clear ownership of the property and can’t rightfully transfer full ownership to you. In extreme cases, renters may pose as owners and sell you the property. In more common cases, you may buy a house from a divorced man, whose wife is still co-owner and hasn’t signed off properly on the sale, then shows up later to stake her claim on the house. Or you may find out after the sale that there are liens on the property because the prior owner never paid property taxes. As the owner, those taxes are now your problem, or you risk losing your home.
In other cases, there may be an easement on your property and a few years later a utility company shows up to take advantage of it. Or a cranky neighbor insists you remove a shed on an encroachment.
There are a lot of things that can go wrong, and don’t assume that they will be uncovered during a title search. For a relatively nominal fee, title insurance protects you from the unknowns that can haunt you down the line.
8. DON’T Waive Survey
A survey is essentially a map of the property, outlining legal boundaries and features like fences, pools and even trees along the border. It also determines whether neighbors have any encroachments or easements on your property.
Getting a survey is one of the most important things you can do because it will outline any restrictions or requirements. For example, it will show you where water lines may be running under your yard so you’ll know when you’re required to give access to the utility company should it show up on your doorstep. Or it will show you that the fence you thought was on your property really belongs to your neighbor.
A survey can help you avoid boundary issues and uncover unexpected conditions, like a shared driveway or neighbor’s shed on your property that might be unpleasant to learn about later. It can also be a negotiation tool. If, for example, you find out that the land area is smaller than advertised, you can address it with the seller accordingly.
Buying a new home involves a lot of details. So as you prepare your to-do list, take a few minutes to remind yourself of the don’t-dos. You can protect yourself from headaches and disaster, and enjoy a smoother process that’s much more likely to end in happily ever after.
If you need help navigating the process, contact us for a free consultation and we’ll answer your questions and discuss how we can work for your best interests.