And buyers are pulling out all of the stops to make their offers more attractive. Lizzie Ryan of HomeLight explains that her team has seen buyers using unbelievable tactics to win a home. “Some of these stories include buyers offering a lifetime supply of candy, a puppy, expensive dinners, and wine,” she says. “More than one realtor has seen buyers pay competing bidders to walk away.” While those stories are comical, buyers may also be tempted to use other tactics that aren’t humorous at all; in fact, they could prove to be disastrous. These are some of the home-buying mistakes to avoid. “The lender will require the buyer to pay the difference between the market value and the agreed-upon bid price,” she explains. So, if the home has an appraised market value of $300,000, and you bid $310,000, Williams says you’ll need to pay that additional $10,000 in cash to close on the home—and this is in addition to any required closing costs and down payments required by the lender. But there’s a caveat: It depends on your financial situation and your ability to predict the home’s future market value, according to real estate broker Egypt Sherrod, one of the hosts of HGTV’s new show Married to Real Estate. “Some buyers are rationalizing whether the future appreciation of the property will equate or exceed what they pay for the property today,” Sherrod explains. Even if you pay $30,000 over market value, she says you may break even in three years with the current rate of appreciation. “If they plan to live in the home for five to 10 years, then the overpayment now seems like a sound gamble,” Sherrod adds. But if you aren’t “cash heavy,” she notes, this may be more than you can pay out of pocket. “If your real estate agent has run comparables on the property, they can tell you approximately how much the true worth of the property is,” Sherrod says. However, if you’re relying on financing, she says waiving the appraisal is too risky. “There is always a chance that the appraisal comes back lower than the contract price—and then you’ll be responsible for paying the cash difference.” And if you don’t have the liquid funds to do so, Sherrod says the deal will be terminated—and you will have lost your earnest money deposit, since the appraisal contingency was waived. “Buyers should think to themselves, ‘How will I feel if the amount I bidded is accepted?’” says Michael J. Franco, a broker at Compass in New York City. If it’s an amount you’re not comfortable with, he warns that you’ll regret it—and the deal may end up falling through. Even worse, you may go through with the purchase and struggle to pay your mortgage. Alternatively, if you bid low and don’t get the property, he says there’s a tendency to regret not bidding more. “But if you can’t afford the bid, it simply isn’t the right property for you.” Franco says. We get it: You don’t want to do anything to slow down the home-buying process. However, Jackson recommends taking a contractor or inspector along on your initial house tour. “While it may cost a few hundred dollars to do so, it will be money well spent, because this person can check out the roof, hot water heater, and HVAC units—and give you an estimate on the cost of potential repairs.” “Buying the best house in the worst location is a curse, because you can always make changes to the inside of the home, but you can never change locations,” she says. Also, if you buy a home near a railway track or flight path, Jay says the noise will never go away—and you may or may not grow accustomed to it. “A buyer needs to be aware of the cost, time, and emotions involved with these kinds of projects,” she says. And it can be easy to underestimate each of those three factors. “Purchasing a home should be a positive and exciting time, not something that’s going to drain you both emotionally and financially,” she says. “It’s tempting to want to get new furniture, but do not open any new lines of credit until you close on the home,” advises Williams. Why not? “Lenders reverify everything—debt, income, employment, bank statements, and credit score—prior to giving final approval to complete the purchase of the home.” And she says you can lose your financing approval if you increase debt, reduce income, or change employment during the home-buying process. Whether it’s a cash offer or a pre-approval letter, she recommends being prepared for all aspects of financing a home before planning to buy one.
