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How to Avoid Common Real Estate Mistakes

Spring is typically peak season for buying and selling homes. But many Americans jump into this major transaction without doing their homework, and that could cost them.

CBS News Business and Economic Correspondent Rebecca Jarvis said on "The Early Show" Thursday buyers and sellers can expect two big unknowns in the stabilizing market: What happens with the federal stimulus money expires after April 30? And with foreclosures increasing, how much could that weigh in on prices?

Jarvis said with the inventory of homes on the market dropping, fewer sellers are slashing prices. So what do you need to know if you're selling or buying?

Jarvis shared these mistakes and how to avoid them:

Seller Mistakes:

Pick a Bad Agent
Find someone who has successfully sold similar homes in your area. When you're selecting an agent, ask them to show you three recent sales of homes comparable to yours in price and location. You may also want to look at their asking price-to-selling price ratio.

Fail to Prepare Home
Hide your knick-knacks. Don't want your personal taste to sway would-be buyers in wrong direction. Move furniture so your home looks big and clean. Add a fresh coat of paint, which is the easiest and least expensive way to make home look best. Make repairs: Fix leaky faucets and little stuff. A potential buyer may see a loose doorknob and wonder if there are bigger problems with the house lurking.

It's not necessary to get a professional stager, but if you want to, expect to pay $200 to $350 for a consultation, $500 to $1,200 for the actual staging. Sometimes agents will cover this cost at the close, so ask.

Choose the Wrong Buyer
Now more than ever, sellers need to select their buyers carefully. With banks tightening their lending practices, it's more difficult for consumers to qualify for mortgages. So it's critical to find a buyer with a recent prequalification letter (issued no later than four to six weeks ago) for a loan.

Look for first-time home buyers or someone who has already unloaded an existing house to decrease contingencies.

Home Buyer Mistakes:

Ignore Your Credit Score:
Clean up your credit. Know your FICO score and clean it up. The lower your credit score, the more lenders will charge you on your mortgage. Pre-credit crisis, a 680 credit score was OK, today you might need a credit score of 720 to get a good rate.

And remember: no major purchases before you qualify for mortgage. Your FICO score can drop anytime you open new credit accounts -- credit card, auto loan - hold off on this until after.

Forget About Additional Costs
Before buying a home, it's important to know what you'll pay in addition to the price of the home alone. Before you buy, consider the cost of insuring it and taxes.

Leave Out the Experts
Don't skimp on hiring an inspector. The cost of repairs far exceeds the cost of inspection. Have a professional look at every component of the home you want to buy -- the foundation, electrical, plumbing, roof, attic insulation, and heating and air conditioning, mold and termites.

You may want to consider hiring a lawyer. It's the only person in a transaction that's not incentivized to get a deal done. A real estate attorney will charge flat fees and offer objective advice.