Purchasing a vacation home is an exciting step. However, there are a few different things you need to be aware of before you make such a big investment.
Here are the 5 mistakes you need to avoid.
Mistake: Waiting to analyze your credit until you find a home you want to purchase
Even if you always pay your bills on time, mistakes and omissions can get in your credit report. These can be corrected, but it takes time. Thus, well before you’re ready to buy, go to annualcreditreport.com and order your free report from each of the 3 reporting agencies. When I first did this, one of my reports had my address as a combination of where I live now and where I lived 8 years ago. There was also a lien on my house from a home equity line that I had never used. It got straightened out, but it took a few weeks.
Next, go to one of the banks that lend actively around Lake Gaston (any Lake realtor can tell you who they are) and ask to be preapproved (not prequalified) for a mortgage. The bank will be glad to do this (for free) as they hope to get your loan. Be brutally honest with the lender. If there’s a problem, now is the time to find out and go to work on solving it. Because of heavy regulation, banks are much more nitpicky than they used to be. While going through this with one buyer, we discovered that, while he told us he was divorced, he actually wasn’t.
Mistake: Failing to interview several realtors
You’re going to hire someone to help you with one of the biggest purchases you’ll ever make. So you want them to be very knowledgeable about the local market and also someone you connect with. Don’t weigh personality too much – “She’s so friendly”, but weigh her ability to understand what you want heavily – “So the swimmability of the water is very important to you, but the house comparatively less so?”
Mistake: Failure to allow enough time to find a home
Lake Gaston has 350 miles of shoreline. You can not possibly make an intelligent decision in one trip. I usually tell prospective purchasers to look around on at least 3 separate occasions. The first time, we just look at different houses to see what’s really important to them – “I just love that view from the family room” and what isn’t – “Why such an elaborate kitchen? Who’s going to do a lot of cooking at the Lake?”
On the second trip, we look at houses in their budget range so they can start thinking about individual houses. “I really like this waterfront, but the lot is pretty steep.” Unfortunately, there’s no perfect house, in any price range, and they need to start thinking about what they can live with and what they can’t.
By the third trip, we’ve usually narrowed it down to 2 or 3 homes and they will get down to some serious thinking.
Mistake: Failing to Consider There’s a very Active Lake Rental Market
As a realtor, it’s almost funny, but no matter how high the buyers’ budget, the house they love will be about a third more. If the top of their budget is $300,000, the house they’ll love will be $390,000. If it’s $600,000, the house they’ll fall in love with (usually) will be $780,000.
As a practical matter, no matter how much you love your vacation home, you won’t be able to use it every week. Therefore, you can pretty well count on being able to rent it the summer weeks you’re not using it. This may (safely) cover the 30% when you take in to account the tax deductions renting kicks in. You’ll want to be conservative, of course, in estimating this rental income. When you’ve narrowed it down to one prospective home, ask one of the Lake Gaston firms that manages rentals what they think they can rent it for. They’ll be glad to do this for free as they hope to get the rental listing. Also, look at VRBO.com as a double check.
Mistake: Taking it personally
Keep in mind, the seller doesn’t know you. If he rejects your offer, it’s not a personal insult. He’s just trying to get the most he can just like you would if you were selling. Think about your alternatives, then respond in a calm, reasoned manner. I worked with one couple who switched from trying to buy the house they loved to “Showing the seller he can’t push us around.” They walked away, then, after 2 weeks said “Tell the seller we’ll pay his price.” Unfortunately, the house had already sold.
Avoid these 5 mistakes and the odds are very high you’ll make a successful purchase.
Here are the 5 mistakes you need to avoid.
Mistake: Waiting to analyze your credit until you find a home you want to purchase
Even if you always pay your bills on time, mistakes and omissions can get in your credit report. These can be corrected, but it takes time. Thus, well before you’re ready to buy, go to annualcreditreport.com and order your free report from each of the 3 reporting agencies. When I first did this, one of my reports had my address as a combination of where I live now and where I lived 8 years ago. There was also a lien on my house from a home equity line that I had never used. It got straightened out, but it took a few weeks.
Next, go to one of the banks that lend actively around Lake Gaston (any Lake realtor can tell you who they are) and ask to be preapproved (not prequalified) for a mortgage. The bank will be glad to do this (for free) as they hope to get your loan. Be brutally honest with the lender. If there’s a problem, now is the time to find out and go to work on solving it. Because of heavy regulation, banks are much more nitpicky than they used to be. While going through this with one buyer, we discovered that, while he told us he was divorced, he actually wasn’t.
Mistake: Failing to interview several realtors
You’re going to hire someone to help you with one of the biggest purchases you’ll ever make. So you want them to be very knowledgeable about the local market and also someone you connect with. Don’t weigh personality too much – “She’s so friendly”, but weigh her ability to understand what you want heavily – “So the swimmability of the water is very important to you, but the house comparatively less so?”
Mistake: Failure to allow enough time to find a home
Lake Gaston has 350 miles of shoreline. You can not possibly make an intelligent decision in one trip. I usually tell prospective purchasers to look around on at least 3 separate occasions. The first time, we just look at different houses to see what’s really important to them – “I just love that view from the family room” and what isn’t – “Why such an elaborate kitchen? Who’s going to do a lot of cooking at the Lake?”
On the second trip, we look at houses in their budget range so they can start thinking about individual houses. “I really like this waterfront, but the lot is pretty steep.” Unfortunately, there’s no perfect house, in any price range, and they need to start thinking about what they can live with and what they can’t.
By the third trip, we’ve usually narrowed it down to 2 or 3 homes and they will get down to some serious thinking.
Mistake: Failing to Consider There’s a very Active Lake Rental Market
As a realtor, it’s almost funny, but no matter how high the buyers’ budget, the house they love will be about a third more. If the top of their budget is $300,000, the house they’ll love will be $390,000. If it’s $600,000, the house they’ll fall in love with (usually) will be $780,000.
As a practical matter, no matter how much you love your vacation home, you won’t be able to use it every week. Therefore, you can pretty well count on being able to rent it the summer weeks you’re not using it. This may (safely) cover the 30% when you take in to account the tax deductions renting kicks in. You’ll want to be conservative, of course, in estimating this rental income. When you’ve narrowed it down to one prospective home, ask one of the Lake Gaston firms that manages rentals what they think they can rent it for. They’ll be glad to do this for free as they hope to get the rental listing. Also, look at VRBO.com as a double check.
Mistake: Taking it personally
Keep in mind, the seller doesn’t know you. If he rejects your offer, it’s not a personal insult. He’s just trying to get the most he can just like you would if you were selling. Think about your alternatives, then respond in a calm, reasoned manner. I worked with one couple who switched from trying to buy the house they loved to “Showing the seller he can’t push us around.” They walked away, then, after 2 weeks said “Tell the seller we’ll pay his price.” Unfortunately, the house had already sold.
Avoid these 5 mistakes and the odds are very high you’ll make a successful purchase.
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