Mistakes
We all learn from our mistakes but they are an expensive form of education. It’s much cheaper to learn from mistakes made by others. The following is a collection of mistakes I’ve seen. They are being presented here in the hope that you don’t repeat them.
Mistake No. 1:
Following other people’s advice without question. Seeking the advice of friends, relatives, co-workers, etc is good place to start when looking to do a real estate transaction. Don’t lose sight of the source of the information. These individuals will relate their personal experiences to what you are considering doing. Their situation will be different than yours. They may have no idea of how prices and procedures have changed from when they conducted their transactions or they may have nothing to contribute but feel obligated to say something. Either way, the information they provide is given with the best of intentions but will be of questionable use. How best to use this information? Use this data as the basis for the questions you will be asking the professionals. Your accountant, attorney, and broker handle real estate transactions in the normal course of business. These are the
people best equipped to help.
Mistake No 2:
Expecting the right advice from the experts without giving them a complete picture of what you’re doing. You know more about yourself than anyone else does. Because of this it is easy to overlook important details when talking to your professional advisors. When you’re meeting with an advisor, the advisor needs to get an accurate, overall picture of your financial position and intentions in a very short time. During the first 10 to 20 minutes of the conversation, this picture will need to be developed. To get the best information from the people you are depending on, you need to give them an accurate summary of your financial situation. Take a moment before the meeting and list all the pertinent data (anticipated changes in your income or assets, upcoming major expenses such as college, etc) that is needed to best analyze your finances. The more organized you are going into the meeting
the better the quality of the information you will leave the meeting with.
Mistake No. 3:
Paying more attention to the questions you’re asking than the answers you’re getting. It is common to be so anxious to ask your questions that you don’t let the person answer the first before you begin to ask the second one. Due to the financial magnitude of a real estate transaction (it ranks up there as one of the most expensive transactions you will ever do in your life) the natural tendency is for your mind to rush through the thought process in an effort to absorb as much data as possible in the shortest period of time. You need to prevent this from happening. Once a question is asked, pay attention to the answer. Make sure you fully understand the answer. If you don’t, ask follow up questions until you do. Only then move onto the next question. Staying in control will also prevent the time wasting exercise of asking the same question twice.
Mistake No. 4:
Asking the same question twice. This is more serious than making a mistake. It tells the person you talking to that you’re not paying attention to the answers you’re receiving. This allows that person to be more causal with the answers. It you’re not paying attention, why should he bother with a detailed response? A discussion with an advisor is a two-way street. You need to be specific with your questions in order to expect the proper response. The advisor needs to answer your question in a language you understand, not “industry speak” and be prepared for a follow-up question to the response. Your responsibility is to listen to the answer, be comfortable with your understanding of the answer and then move on.
Mistake No. 5:
Following advice blindly. When working with any professional you need to keep in mind where they fit into the transaction. Your accountant will be advising you from a tax and affordability perspective. Your attorney will be advising you so as to eliminate any risk in doing a particular real estate transaction. The mortgage broker is focusing in on the alternate ways to finance the transaction with the associate benefits and risks of each approach. The real estate broker’s position is finding the ways to hold the deal together. Your job is to take all this data and relate it to your particular needs. All deals are arranged through a series of comprises. Only you are in the position to weigh what compromises you are willing to make to complete this transaction.
Mistake No. 6:
Expecting all parties involved in your transaction to perform their jobs in a professional and timely fashion. One reality of life is that no one is perfect. One reality of a real estate transaction is that there will be more than 50 individuals that will have an influence on the timing of your deal closing. Messengers, receptionists, appraisers, attorneys, processors, underwriters, title examiners, paralegals, secretaries, brokers, are just some of the many individuals that you will be depending on. Any one of these people can cause a delay in a timely closing. Don’t box yourself into a corner by depending on the closing date on the sales contract to be the same as the actual date of closing. Stay as flexible as possible and the process will be a smooth one.
Mistake No. 7:
Entering the housing market as if you were entering a flea market. Negotiating the sales price of a piece of real estate is not a game. You need to keep focused on the magnitude of the transaction. Haggling over the last $3,000 on a $300,000 purchase is more of a battle of egos than price negotiating. No, you shouldn’t pay more for a property than what you think it’s worth and you shouldn’t sell a property for less then you think you should get. Realistically, no one, not even an appraiser, can set the value of a property with that degree of accuracy. In this example we are discussing a price difference of 1%. Don’t let your ego cloud your judgment. Negotiate based on cold hard facts (values of homes in the area, does the house fit your family needs, etc) and not from a position of stubbornness.
Mistake No. 8:
Placing blame instead of finding a solution. Mistakes happen, no one is perfect. When a problem arises the natural tendency is to find out who caused the problem. Resist the temptation. People get defensive when you’re looking to place blame. Once they realize your focus is on addressing or correcting the problem, they become your best friend. Now they will do anything to help. This gets your deal closed. This is your ultimate goal. You need to keep that in mind at all times.
Mistake No. 9:
Getting too involved in your own transaction. This is a subtle mistake and one you won’t even realize you’re making. You need to know what’s going on with your transaction. You are entitled to confirmation that the process is moving along properly. You don’t want to call everyone involved in the transaction daily to keep tabs on them. There is a balance that you need to maintain that keeps you informed and at the same time allows people to do their jobs. Remember if they are talking to you they can’t be working on your file.
Mistake No. 10:
Keep asking the same question until you hear the answer you want to hear. This mistake occurs in two different ways. The first is trying to be an educated consumer and shopping for rates. Yes, doing research is the right thing to do. In your price shopping exercise you will find that most lenders are very close to each other in pricing (that is assuming the calls are made within the same day to avoid pricing differences due to market fluctuation). Then you contact a funding source that you probably never heard of before and find pricing far superior to anyone else. You’ve now found what you were looking for, a deal that can’t be beat! Anything is possible, but always remember to be cautious when finding a deal that is “too good to be true”. Chances are that you didn’t find the best deal, but came across an offer that is structured to look cheaper than it really is. Call it
“smoke and mirrors”, “bait and switch”, etc but the fact remains that you should remember there “are no free rides in life”. If a deal is “to good to be true” it probably isn’t.
The second version of this mistake is asking one of your advisors the same question over and over again, with minor variations, until you trap the person into saying something they didn’t want to say. This situation usually occurs when you think you’re not getting the answer you want to hear because of a misunderstanding of the question being asked, not due to the answer not being acceptable to you. You keep changing the wording of the question, thinking it is being misunderstood, and the person you’re asking keeps rewording the answer, thinking he is not making his point clear. The end result is, both parties end the conversation with less clarity than they had before the conversation started!
All these mistakes have one thing in common. Initially you would never realize they were errors. It’s only after a closer examination of the consequences of the mistake, does the cause of the problem become evident. |