BUYER BEWARE

According to Cornell Law School, the words Caveat Emptor “are Latin for ‘let the buyer beware.’…A doctrine that often places on buyers the burden to reasonably examine property before purchase and take responsibility for its condition…Especially applicable to items that are not covered under a strict warranty.”

These two simple words, be they in Latin or English, can leave a profound impact on the finances of a homebuyer. Purchasing a house, apartment, condo or other dwelling is without question one of the biggest moves you will ever make in your life. Hopefully, none of the details will fall through the cracks.

But mistakes large and small can happen, leaving a homebuyer or would-be homebuyer in financial freefall. Beyond the cautionary warning of “Buyer Beware” and how it relates to the physical condition of a new home and the onus on the purchaser, issues surrounding your credit report and big purchases made as your deal is unfolding can generate a lot to consider when taking on a life-changing endeavor such as purchasing a new home. If you make a wrong move, emotional and financial recovery could take years. So yes, buyer beware indeed. 

The rapid pace at which the national real estate market has been evolving hasn’t helped anything. That’s because we all know that when we move quickly, it’s easier to make mistakes. 

According to Quickenloans.com, “the COVID-19 pandemic came and threw the market into a counterintuitive frenzy, with higher-than-ever prices, surging buyer demand and historically low mortgage rates.”

Quickenloans.com, sharing information from Realtor.com, said, “home prices in 2020 shot up more than 10% compared to the previous year. In 2021, according to these predictions, prices will continue to climb—though not quite as dramatically as they did in 2020, thanks to an increase in sellers that will help quell buyer demand. For the entire U.S., Realtor.com predicts that in 2021 prices will see an increase of 5.7% year-over-year, while home sales will increase 7% year-over-year.”

If you’re planning on purchasing a new home, a solid first step is to give the law firm of Phillips & Millman a ring. These attorneys have a long history with real estate transactions, helping clients navigate red tape and ensuring that nothing falls through the cracks, from start to finish and beyond. Give a call at 845-947-1100 or visit pmlawny.com to get the ball rolling.

According to Phillips & Millman, if your offer to purchase a new home has been accepted, you’ve signed a contract and you are in escrow, waiting for the deal to close, you don’t want to open a new credit card or secure a new line of credit. That could impact the loan you’ve taken out to buy your dream home. You also don’t want to pay off an existing credit card with a substantial balance, because that could affect your loan. And as anxious as you are to make a big purchase in advance of sealing the deal—maybe new furniture, maybe new appliances—don’t do it. That could flag you (with credit reporting agencies?), it could throw a monkey wrench into your escrow, it could cost you and it could prevent the deal from closing on the schedule for which you had planned.

According to Quickenloans.com, applying for credit before closing is one of the “15 First Time Home Buyer Mistakes.”

After the offer is accepted, it can be hard to fight the urge to buy all the things for your new home,” the website reads. “With new furniture, appliances and decorations to buy, many people apply for new lines of credit before closing on a house. What they fail to realize is, by doing this, they could be affecting their chances of getting the loan needed to close on the home.”

The problem is that, “Lenders don’t just check your credit score during the pre-approval process. Most will also check it just before your scheduled closing day. If you apply for credit before closing, it could cause your score to drop significantly. And if it drops below the score required for you to qualify for your loan, you may not be able to secure financing for your new home.

“Along with dropping your credit score, maxing out your cards or racking up charges also increase your debt-to-income ratio, which needs to be under 50% to qualify for a home loan.”

Yes, we know that this is a lot to think about at a time when you, in the pursuit of a new home, already have a lot to think about. But if you don’t plan for these things, if you don’t give it all a good thinking over, major, major problems that once made for ominous, cautionary tales could consume your life, your waking hours and your savings. 

The purchase of a new home can turn from sweet to sour in an instant. Do all you can to create a home, sweet home. Be smart. Think smart. Act smart. Save smart. Spend smart.