The First-time home buyer’s dream of finding the perfect home in the Greater Toronto Area can turn into a nightmare without proper preparation, especially in a market in which swift action is necessary.
Since my job is to help you catch your dream, allow me to share the six biggest mistakes first-time homebuyers make.
Nancy and Adhi, educated and smart people, embraced the DIY approach. With all the available information online –and helpful uncle Selvan--, they preferred to deal with several Realtors simultaneously and write the offer with whoever was selling the house.
They went ahead and spent countless hours searching online and talking to Realtors without realizing that those agents’ job was to sell the property in the fastest possible time and at the highest possible price, as that was their duty to their clients (the sellers). In other words, they had no obligation of alerting the buyers to any shortcomings or limitations of the property unless as specified under the law. And this does not mean there was any deceit involved. For instance, some sellers know little about the property they are selling. They may have never lived in the property or may see nothing wrong with the nude beach two blocks away.
In a hot market where you compete in a succession of multiple offers and where a moment’s hesitation or a misstep may cost you the deal, a buyer’s agents can be worth their weight in gold.
A buyer’s agent would have learned that Nancy and Adhi were a religious, conservative couple planning to have children and may have saved them the thousands of dollars they eventually had to pay to fix the cracked foundation the uneven floors suggested.
As it was, Nancy and Adhi found themselves with a house in need of expensive repairs and a nude beach on their way to the park. Don’t let this happen to you. Hire a reputable real estate agent, sign a buyer agency agreement, and ask what first time home buyer assistance programs are available.
Like many other first-time buyers, Ezhil and Kannan lost precious time looking at properties without really establishing what they needed or could afford. By the time they found a real estate expert, they were tired, disappointed, and had lost their joy.
To get them back on track, their agent suggested the drafting of a list with three columns: wishes, wants, and needs.
Under the “wishes” column, they wrote the features or qualities it would have been a bonus to have, as an outside fireplace. Under the “wants” column, they included a media room and a manicured garden, which they would have liked to have but was not a deal-breaker.
When they began writing down what they needed, Ezhil realized that she envisioned their kids going to a particular school. Therefore, the family had to live within the catchment area of that preferred school. They also needed a backyard, a suite for Kannan’s parents, and an office. Under this column belong what you would always be upset or uncomfortable about not having—the non-negotiables. VIew Condos for Sale in Ajax
Go over your list before and after visiting properties and assign a score from one to ten. The excitement of buying your first house or condo can make you forget what your priorities are.
Before talking to a bank or a mortgage broker, you’ll be guessing your wherewithal; and in a fast-paced market, a pre-approved loan can save the day.
For Rahul, it came as a surprise how long the process took. He had been confident about how much he could afford and thought it would be easy --only it wasn’t.
Rahul found a stunning condo and decided to put an offer. As they drafted the contract, his agent warned him about the perils of not making the offer subject to home loan financing. Still, Rahul decided to proceed as another offer was coming in for the same condo. The sellers accepted Rahul’s offer; he felt like a winner... until the running-around began.
Sometimes the process takes longer than anyone would hope. Your lender will ask you for years of financial paperwork and will take time to find options for you. Once you have the necessary documents, ask other lenders and compare mortgage rates and terms. As for Rahul, he had no time for that.
His lender only lent him a part of what he needed at a less than optimal rate, despite his six-figure salary. Rahul had a moment of panic. But there was no choice. Bound by a purchase and sale agreement, he would have been sued had he not completed the sale.
To complement the purchase price, Rahul tearily sold his beloved BMW M4 and took a loan from a family member. Had he begun early, he would have either found a property within his budget or a different lender.
Rahul’s story is an example of what not to do, so we’ll stick with him for the next two big mistakes first-time buyers make.
The first property you buy can heavily influence your financial future. It follows, then, that making an emotional decision is not what you want to do. It’s common to see first-time buyers fall in love with a home in the Greater Toronto Area and, after that, they become deaf to any contrary opinion. Remember Rahul?
Rahul bought a brand new, top-of-the-line condo. Great, right? Not really, because there was nothing he could do to increase the value of the condo. No sweat equity he could put in. It’s already awesome, and Rahul had paid GST to boot, so the market had to rise for him to make a profit or at least break even.
He could have bought a property in need of TLC and improved it, thus increasing its market value. True, he wouldn’t have lived the posh lifestyle he aspired to at first. But his chances of making a profit would have increased dramatically; and, in time, he could have used that property to finance a second property, and so on.
Plus, he could have kept his car. Oh, no, wait, he couldn’t have. Rahul had made another of the six big mistakes first-time homebuyers make, and it turned out to be the root cause of all his troubles. Read this article if you are buying a home for first time: first time home buyers mistake
Isn’t it fantastic that stores offer reward credit cards? Rahul thought so too. He loved them. He discovered several in the last five years, and he maxed them out often, so when he lost his job three years ago, he skipped payments.
But he had had an excellent job for almost two years now, and a six-figure salary too. So when he sought a mortgage for his dream condo, he was confident. Confidence turned into bafflement, though, when he heard that his credit score wasn’t great.
He couldn’t believe it, but late payments stay on your account for six years, and banks don’t like it when you have too many new sources of credit. “But I canceled most of them two years ago!” he said in despair. “Well, according to Equifax, even when you pay off your credit card and close it, it stays on your credit report for up to 10 years. Sorry,” was the answer he got.
When you are preparing to buy a home, refrain from opening a credit line, quitting your job, or going on a shopping spree.
Pat didn’t think she needed to worry about the negotiation. She believed her real estate agent would take care of everything. And he did, only the Realtor does not make the decisions. The client does.
Not preparing for negotiations is one major cause of the post-sale feelings of regret and anxiety called buyers’ remorse. Key points to think about are:
Win-win or win-lose? Pat’s attitude throughout showed she wanted to win over a defeated foe, starting with the price and following with her rejection of the seller’s requests. Aiming for a win-win and finding mutual ground yields happier memories of your purchase.
There’s more than money: It took Pat some time to understand that they were negotiating other things like time, chattels, and particular repairs. In the end, Pat agreed to concede the extra time the seller needed in exchange for a patio set and firepit that made the deck look like a picture in a magazine.
Know your bottom line: this is the price at which you will walk away. When you know this ahead of time, you will be less likely to give in to pressures and feel buyers’ remorse afterward.
Know your BATNA: this stands for Best Alternative to a Negotiated Agreement. What will you do if this deal does not go through? Make a list of other properties you would consider and be mentally ready to move on.
Real estate agents try to create a smooth experience for you, but there’s a lot that could go wrong. Trust the expertise of a real estate agent who is committed to his work. Read the reviews and choose someone who feels like a new friend.