15 Expensive Real Estate Mistakes You Might Be Making Right Now

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People get into real estate with their mind set on profits, growth, and of course that feeling of property ownership. Along the way, though, it’s easy to make expensive mistakes that can empty your wallet or put your plans on hold. Real estate is a complicated game and you need to be careful. From rookie mistakes to things that get overlooked.

What are these wallet busting pitfalls, then? We’ll break down some of the most common, expensive real estate mistakes that you might be making including hidden expenses, emotional attachments and over leveraged. If you’re thinking about any kind of property investment, avoiding these traps will save you thousands, and a few headaches too.

Forget About Property Taxes

Property taxes vary widely from place to place, and can increase dramatically over time. Until they receive their first bill, many buyers ignore how much they will owe in property taxes. When you consider the area’s tax rates as part of your long term budget, especially if you’re planning to stay in the home for many years, it’s definitely something to consider.

Over-leveraging on Financing

With low interest rates, it’s so easy to think you can afford a bigger loan than you really can. However, over-leveraging — borrowing too much — will come back to bite you quickly if you have unexpected expenses or your income changes. Instead aim to stay in your financial comfort zone and not stretch every last dollar.

Getting Too Emotionally Attached

The emotional part of buying property can be a journey, but letting feelings rule the decision can mean overspending or missing practicalities. Buyers become emotionally attached to a particular home, and then start with denial when it comes to warning signs, and they end up over paying what the home is actually worth. Keep a clear head, and remember: real estate is an investment, not a love affair.

Renovation Costs Underestimated

Outrageous Oops Moments That Ruined People's Homes — Image Credit: Pikwizard.com

Home renovations on TV shows seem easy, but they don’t usually tell you about the unexpected costs and delays. Careful planning only buys you 20-30% less than you expect being spent on renovations. When planning upgrades, it’s good to add a little extra to the budget because you don’t want to run out of funds.

Skipping a Title Search

Title issues can stop your ownership dreams before you’ve even started. A title search will ensure the property is free from legal encumbrances such as liens and outstanding ownership disputes. Without a proper title search, you could be left with someone else’s debts. Although title insurance isn’t flashy, it’s a necessary safety net.

Overlooking Resale Value

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Sometimes, we’re so caught up in what we need now that we forget to think about the resale value. Finding a home that fits your style is great, but it might turn off other people when it comes time to sell. To not lose money in the future, stick with upgrades and features that will appeal to a wider audience.

Lacking Market Fluctuation Planning

Real estate prices don’t always go up. Many buyers believe that their investment will appreciate, but markets can fall for years. If you’re buying with resale in mind, it’s wise to have a financial buffer in case the market stalls or declines. If you time your purchase well and have realistic expectations, you will not lose.

Misjudging Rental Potential

13 Secrets Realtors Don’t Want You to Know — Photo Credit: Pexels

If you’re buying as an investment property, you should only do so if there’s a good rental market. Many people assume they’ll get high rents, without doing the research on the local demand. A rental market that’s already saturated can make it difficult to find reliable tenants, and a vacant property is a money pit.

Not Hiring an Experienced Agent

Going solo saves you on commission fees, but it can be expensive if you don’t understand real estate. A good agent knows the local market, he can show you more property, and he can be more effective in negotiating. The National Association of Realtors says that nearly 90 percent of home buyers work with an agent because the advice often pays off.

Focusing Only on New Builds

It’s nice to have a brand new home, but older homes often have a lot of character — and possibly a better deal. Hidden costs of new builds exist and sometimes older homes are in the middle of desirable neighborhoods. It’s not about how new the house is, it’s not about how old it is; sometimes the existing homes that need a little updating are worth the money.

The Costs of Ownership Underestimation

The mortgage is not the only part of owning property. You have insurance, maintenance, property taxes, and the occasional surprise repair. These ‘extra’ costs do add up quickly. A Zillow study shows that homeowners typically spend 1 to 2 percent of the home’s value each year on upkeep. Don’t get blindsided: prepare a budget that includes these hidden costs.

Skipping a Home Inspection

Mistakes That Are Secretly Ruining Your Home’s Look — Photo Credit: Shutterstock

If the property looks fine, or recently renovated, it may be tempting to skip the inspection, saving a few bucks. Fresh paint and polished floors may seem like a fix for problems, but there’s a lot going on underneath. If you don’t have an inspection, you can miss structural problems, pest infestations, or outdated wiring. It seems like an additional expense, but it’s much cheaper than having to deal with major problems later.

Neglecting to Check HOA Rules

"22 Common Gripes Homeowners Have with HOAs" — Image Credit: Pikwizard

When you buy within a homeowners association, you’ll have to follow their rules and pay their fees. HOAs can decide the paint colors and landscaping choices. This can be an expensive mistake if you’re not prepared to comply or budget for HOA fees. When people become aware that they are bound by restrictive regulations, they can end up with buyer’s remorse.

Not Comparing Loan Options

Interest rates and terms vary from lender to lender and many buyers lock in with the first mortgage offer they receive. If you aren’t shopping around, you could end up paying thousands more over the life of your loan. Compare several mortgage quotes and read the fine print. A slightly lower rate makes a big difference in your monthly payments.

Underestimating Closing Costs

Closing costs can be a nasty surprise, often running from 2 percent to 5 percent of the purchase price of the home. It’s easy to overlook fees for things like appraisals, legal paperwork, and taxes. Then, many buyers save up for the down payment, only to be hit with closing costs they didn’t plan for. Don’t budget these in at the last minute to catch you unawares.

Disclaimer: This list is solely the author’s opinion based on research and publicly available information.