Last week on the Tropical Financial Credit Union Blog, we went through four first time home buyer mistakes that people often make when they purchase a home. Hopefully you didn't find it too overwhelming because now we have four MORE mistakes you might be on the edge of making.
But fear not, dear reader, I am here to help you navigate these sometimes choppy real estate waters.
5. The Mistake: Not Taking Service Contracts Into Account
I’m going to tell you a true story because I am a writer and I am a big fan of stories. I purchased a new home in the Palm Beach area a few years back. You know what I thought about a lot? How nice the icy arctic blast of the central air conditioning felt amidst the sultry, sweaty Florida summer days.
That is, until the air conditioner stopped working. No problem, I thought. I’ll just call the company that built the home and have them service it like the contract said they will.
Except the contract didn’t say that. At least, not after the first year of home ownership. I would say that my reaction was icy at best, but I hate puns about the cold and air conditioning.
The moral of this story is that you need to know exactly what service contracts you have, who is covering what, for how long and under what circumstances. Not to mention how much these service contracts may cost you, if anything.
Knowing this information can save you a great deal of money. You can avoid re-paying for work you already have under contract. You also have plenty of time to shop around before a contract’s terms expire so that you know who will be coming to fix your air conditioner when it breaks and for how much money.
6. The Mistake: “My Home Passed Inspection. No Fear!”
Be afraid. Be very afraid. I’m going to tell you another true story because yep, I’m still a fan of stories. My brother purchased an older home in Houston. It was large, kind of rustic, and very charming.
Oh, but there was a catch. There’s often a catch. The catch was that the second floor was on its way to collapsing and crashing down onto the first floor due to rotting wood or something. No biggie!
Actually it was a real biggie. Not only did my brother's family spend several months fearing for their lives – probably justifiable – but they also had to shell out a lot of money to fix the problem.
Now, a good home inspector who checks the house when you move in is going to catch the little things like a leaky pipe or a hard to reach electrical outlet or the second story spelunking into the dark abyss of the first floor.
But this inspector didn’t. The house passed inspection. My brother probably paid way more for it than he should have AND he had to fix the second story floor.
Now, my brother usually makes good decisions – probably better ones than I do most of the time! – but it seems like he maybe should’ve gotten a second opinion on this one. Just a thought.
7. The Mistake: Not Planning To Have HOA Fees
I didn’t plan on having income taxes to pay last year. You know what happened? I had to pay income tax.
I am reminded that John Lennon once famously said that “I am the walrus.” I don’t know why he said that, but something else he said was, “Life is what happens while you’re busy making other plans.” That one makes more sense to me.
You may not be banking on HOA fees – they may not have even crossed your mind – but this is when it’s best to read the fine print, especially here in Florida where there are so many gated communities and the like.
Good financial planning – whether we’re talking your monthly grocery budget or buying a home – relies on accurate information. If you don’t know your true costs or at least have a reasonably accurate estimate, your planned budget will be unhelpful.
If you don’t know whether you will be assessed HOA fees, go forth and find out. It may sting at first, but it burns much less when you know it going in than when it pops up from nowhere like a scary clown springing forth from your oversized birthday cake. And who likes scary clowns? Nobody, nobody likes scary clowns, that’s who.
8. The Mistake: Ignoring The Potential For Insurance Or Tax Increases
I used to study philosophy in college, and in philosophy something that was “potential” was generally treated as a second class citizen to something that was “actual.”
For example, me “potentially” going for coffee next week with my favorite Hollywood star, Jennifer Lawrence, would not be as great as actually going for coffee with her. Having only ever been potentially and not actually out for coffee with the brilliant Ms. Lawrence, I’d wager that this might be true.
The problem when it comes to potential tax and insurance increases, however, is that far too often they become all too actual. Tax increases, as it turns out, are far less elusive than the former star of The Hunger Games franchise is. So are insurance increases, by the way.
Due to inflation, other economic forces, and human nature, prices often go up rather than down. The solution to this problem, as is so often the case with financial matters, is planning.
How have these rates increased in previous years? That’s a really great way to ballpark how much the costs might continue to rise during your time of home ownership. Make note and expect it. When they hit, you won’t be strapped and wondering what just sucker punched you in the face like Katniss Everdeen combating an oppressive tyrant.
Nobody's Perfect But Let's Aim For It Anyway
We are none of us perfect. You will inevitably make real estate mistakes, and so will I. But by keeping in mind these 8 rookie errors that many other people have made, hopefully you’ll be able avoid the big ones and you'll easily handle the little ones.
And remember, you never need to go it alone. Tropical Financial Credit Union is always here to help you figure out a game plan to avoid these types of financial mistakes people make when they buy a new home. At Tropical, we love to help. As much as we love dark chocolate. Which is a lot. Hey, they say it's good for your heart - I meant dark chocolate, but helping too!
In the spirit of helping, here's our guide on The Road to Homeownership. You may find the Monthly Budget Worksheet especially helpful, but there's lots of good stuff in there. And have some dark chocolate while you're reading it. Or whatever snack rocks your socks.
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