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How Not To Pay Too Much For Your Home
Whether you are buying your first home, or your fifth, the process of buying
a home is a detailed, time-consuming venture. At the same time,
it’s an emotional period laden with difficult choices. You want
to ensure that the home you purchase meets your family’s needs
now, and in the future.
Each of these decisions often involves money. When you consider all that
money represents, you’ll want to ensure that you don’t pay too
much. This article helps you become a savvy buyer, by pointing
out some of the pitfalls inherent in the home-buying process.
These include such things as knowing what you want before you
begin shopping, taking your time to shop, choosing the right
realtor, and remaining objective while viewing potential homes.
With this information, you’ll be closer to finding your ideal
home.
#1 Before you shop, develop a needs vs. wants list
Everyone has a picture of an ideal home. This would include all
the features you not only need, but have long desired. However,
when it comes time to buying a home, the desires cost more.
While it’s nice to think about having a beautifully landscaped
backyard, or a solarium, perhaps even some built-in appliances,
these are usually considered luxury items, which can add
considerably to the price of your home.
That’s why it’s a good idea to develop a needs and wants lists. With
this list, begin with items you really need like adequate space,
garage and number of bedrooms. For most people, basic needs
should be considered first. After that, you could consider
additional desires, if you can manage these benefits
financially.
With such a list in your hands, you’re less likely to be caught up in the
excitement of the pursuit. You’ll have a good idea of what you
want, within you price range, and if you can afford those
additional items.
#2 Get pre-approved prior to shopping
Visit your financial or lending institution prior to home
buying. Quickly, you’ll know the amount of mortgage you’ll
receive. Be sure to get a mortgage commitment in writing. Most
importantly, you’ll tell sellers that you are a serious
prospect. Depending upon market conditions, a seller may lean
towards an unconditional offer. You’ll have less negotiating
power if you have to wait for mortgage approval.
Banks and financial institutions have developed many programs especially
for home buyers, be that first-time buyers or those with equity
in their homes. When you review your needs and objectives with a
lending officer, you’ll be one step closer to purchasing your
home.
#3 Choose your winning team
Buying a home is a complicated process, with many people
involved. From choosing the right mortgage, to finding a home
inspector, to viewing available properties, there are many steps
involved for even the hardiest person. With a professional
realtor on your side, you’ll have access to these services,
already in place, and highly recommended. A good agent has the
knowledge and experience developed from many years of helping
both buyers and sellers. During this time they have developed a
network of people, from lenders, lawyers, home inspectors and
movers, to assist both home buyers and sellers.
#4 Communicate clearly with your Realtor
Spending time with your Realtor will reap huge dividends. When
you have a clear picture of the type of home you’re looking for,
your Realtor can come closer to finding the home you want. You
won’t waste time looking at homes that don’t match your needs.
#5 It’s still true – location, location, location
You’ve heard it so many times, that it’s probably starting to
sound like a broken record. That’s because it’s true! A home is
not a stand alone item. Rather the value of a home is greatly
affected by the surrounding homes. Don’t let your emotions
determine your purchase. Think resale. The desirability and
resale value of your home depends largely on location more than
any other factor. People want a desirable community that
includes character, quality of schools, access to work, major
transportation arteries, recreational facilities, etc.
On your viewing trips, take a careful look and ask the following
questions: How does this home compare to others in the
neighborhood? Are yards fenced? Are there many children playing
in the streets? Are front and backyards and the exterior of the
homes properly maintained?
Walk around the neighborhood and get a feel for the people living in
the area. You may want to speak with a few neighbors to get
their comments. If you like the community, carefully examine the
home you like. Generally speaking, extremely large homes
surrounded by smaller homes tend to appreciate less than a large
home among other large homes. Alternatively, the smallest home
in the neighborhood tends to stand out by the other homes on the
block. Sometimes, it could take a bit longer to sell a smaller
home, as some people are reluctant to pay extra for the
neighborhood.
Additional factors that affect the property value of a home
include traffic, sounds, smells, zoning bylaws. Be objective.
Don’t rely too heavily on your emotions. Be sure you are
completely satisfied with the neighborhood. If you choose a
neighborhood with problems, you likely won’t get as much as you
hoped with it comes time to sell.
#6 Use your Realtors’ knowledge of the community
Your Realtor is trained in all aspects of Real Estate,
including understanding supply and demand, economics and the
neighborhoods of the city in which they practice. As they
regularly view homes as they are placed on the market, they are
at the heartbeat of knowledge and information about housing
trends and prices. They can save you time and money, by
narrowing your prospects to only those that meet your
requirements. It is a very time consuming process to view every
home available that meets your needs. A professional Realtor can
do much of the work for you, by reviewing your needs, reviewing
the properties and then hopefully, advising you of a potential
match. A comprehensive knowledge of the available homes in your
neighborhood is one of your Realtor’s strongest assets. With the
aid of computerized systems, a Realtor is notified within hours
when a home becomes available.
#7 Check your emotions, and shop with your head
When people purchase a home on emotion, without an objective
view of the property, problems may develop later. Shopping for a
home is an emotional process. It could be costly. Using your
head, along with asking for an objective opinion (from your
Realtor) could help you avoid costly errors.
#8 Pay attention to “red flags”
When evaluating a home, be sure you know the difference between
acceptable and unacceptable problems. Cosmetic items like
peeling paint, worn carpeting, unattractive wallpaper can be
easily remedied. You could use these as negotiating items, as
there will be costs involved in updating the home.
Major problems, however, are clearly “red flags.” Look for items such
as major foundation cracks, water damage, outdated electrical
systems, and inadequate plumbing. These items could cost you
dearly in the future.
#9 Hiring a home inspector is a wise investment
A home inspection is an inexpensive way to gain peace of mind,
and guard your pocket book. A proper inspection will cover all
areas of the house including foundation, electrical, heating,
plumbing, floors, walls, ceilings, attic, roof, siding and trim,
porches, patios, decks, garage and drainage. A professional
inspector can give you an objective view of the property, with a
written report, indicating the present condition and items that
will need repair.
#10 Be cautious with fixer uppers
Some people may be inclined towards purchasing a home that needs
some work. This could be a challenge and an opportunity to make
money. Sometimes, a fixer-upper can be purchased below market
value, and sufficient repairs made to bring it to a good sale
condition with a profit realized. However not all fixer uppers
will bring in the profits you might expect. It depends upon the
price of the home, the amount of repairs needed and the market
conditions at the time of sale. If the home is not priced low
enough, you may not recover your investment of time, trouble and
money. Before you purchase what looks like a quick way to
profit, carefully consider the condition of the home and ALL the
repairs that need to be made. Get several estimates. Complete a
comprehensive budget. Also consult with your Realtor. He or she
can give you an idea of what you can reasonably, expect to
recover when the home is put back on the market.
#11 Consider your future needs
Take a look at your lifestyle now and in the future. Will you
need extra space for a home office, a child, or perhaps a child
moving back home? Perhaps it may be easier and less expensive if
you purchase a home that can meet these needs now, rather than
moving up to a larger home a few years later.
#12 Proceed quickly
When you’re ready to buy, move fairly quickly. That’s because
good properties usually sell fast. This is especially true when
there is a shortage of homes available. However, when you work
with a Realtor, you have access to the most current technology.
As part of the MLS network, a Realtor has access to properties
within hours of when they are listed. Technology works to your
advantage. When a Realtor knows your needs, they will notify you
when properties that meet your criteria become available. Many
Realtors now have personalized web sites which allow you to sign
on a client, and receive notification of these listings via
email. You save time and effort, and you can view only those
homes that come closest to your needs.
#13 Clarify relationships
In any real estate transaction, be very clear about who is
working for whom, and what the relationship represents. Many
people believe that the agent they are working with
automatically represents them and their interests. Yet, without
specific disclosures this is not true. Unless otherwise stated,
the agent represents the seller in transactions for the sale of
a home. This agent, as part of his or her fiduciary duty, must
ensure his loyalty protects the seller’s position throughout the
entire process.
#14 Ask for a written CMA
A Comparative Market Analysis (CMA) is an analysis of comparable
homes in the neighborhood. It shows you the sale prices of
comparable homes in the neighborhood, along with asking prices
of other homes in the area currently on the market. A Realtor
can request this report for any home and neighborhood in Canada.
Ask for this report in writing. With this valuable document,
you’ll have the appropriate evidence for either a too-high
asking price, or one that is a bargain.
#15 Investigate the seller’s situation
Knowing about the seller’s reasons for moving could work to your
advantage during negotiations. For instance, a seller who has
been transferred to another city, may be more motivated to sell
rather than someone who is still shopping for a new home. A
vacant house, a house that has been on the market for several
months and reduced in price, could also be indications of a
motivated seller.
#16 Keep personal information to yourself
Conversely, information could be used to your detriment.
Information about your mortgage, size of down payment, move-in
deadline, or circumstances for buying, could be negotiating
factors. While you want your Realtor to know these details,
don’t reveal any of this information to the seller.
#17 During negotiations, keep your emotions in check
In certain situations, emotion could cost you money. If you let
the seller know how interested you are in the property, this
might be seen as a financial opportunity. Recognizing that you
are highly motivated, you could an easier target for a higher
price. If you absolutely love the home, keep it to yourself.
This is a definite advantage of working with a professional
Realtor. Trained to be non-emotional, he or she can ensure you
get the best price.
#18 Ensure the deal is right before you sign
While you definitely want to move quickly, once you’ve made the
decision to purchase, you don’t want to cave in to pressure for
a quick close. Someone who is trying to pressure you into buying
a home, is doing so for a reason. This could involve money, or a
multitude of other reasons.
#19 Exercise your negotiating skills
Even if you prefer not to haggle, it’s worth it, especially when
it’s your home and your future. Most people expect to haggle
over the price. That’s often why the price is set a big higher
than the actual selling price. There is always room for
negotiation. If you want to get the best home possible for the
least amount of money, then negotiation is the only way to get a
good deal.
#20 Avoid bidding wars
In some cases, the seller’s Realtor may use scare tactics to
rush the sale or increase the price. Falling for this trap could
cost you money. If there is another buyer, or some other reason
this pressure is being applied, whoever wins also loses because
they overpay. If there really isn’t another buyer, then it’s
likely that the deal with fall through.
#21 Insist on a written disclosure of all known defects
Legally, sellers must disclose all known material defects of a
property. Ask for this in writing. Also be sure to consider the
ramifications of these defects. Will it be costly down the road?
Are they “serious” defects?
#22 Be aware of your hidden costs
There is more to a home than simply the mortgage. You will be
responsible for other items including mortgage insurance,
appraisal fees, legal fees, inspection fees, transfer taxes,
title insurance, inspections, etc. Your Realtor can give you a
good idea of the costs associated with buying a home that are
beyond the final negotiated price of your home.
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