How to avoid a million-dollar mistake when buying your first home in Toronto
Will 2017 be the year you finally buy your first home?
If you are a first-time home buyer with major #housinggoals slated for 2017, seasoned real estate duo Erica Smith and Lorena Magallanes of The Condo Chicks say there are a few guidelines you should follow before starting your search.
The reason? When it comes to aspirations of owning property, there are a few oversights many new to the real estate game could learn from, especially for long-time renters who may have grown accustomed to the idea of making short-term plans.
Ask the RIGHT types of questions
Don’t forget to do your homework. Google may provide you with a lot of answers to your questions, but there are certain things you won’t find on a Google or MLS search. Before making a move, having an action plan and potential questions lined up to ask your realtor will help avoid any misunderstandings or hidden costs down the road.
Here are a few things you won’t find answers to online:
- Why is the seller selling?
- How much did the seller pay?
- How much have similar homes sell for in the neighbourhood?
- How many offers has the seller received?
- How old is the roof?
- Have there ever been any leaks in the foundation or flooding?
- If renovations were done to the home, who did the renos and did they have permits?
- Are the schools in the area considered good? Even if you don’t have plans for kids, a good school district always appreciates higher with prospective buyers if you decide to sell later on.
- And lastly, any ghosts reported in the home? You may think this one is funny, or maybe it’s your thing. But, did you know realtors aren’t obligated to disclose this unless you ask?
Look for what’s hot in 10 years vs. right now
It may be difficult to envision where you see yourself 20 years from now, maybe even 5 years into the future, but that type of forward-thinking will help ensure prospective first-time property owners make an investment that grows over time.
We all want to be where the action is. Although the liveliest of areas, these are also the most oversaturated pockets, and they are often the most unaffordable – priced with huge premiums attached.
Instead of maxing out your budget to be in the trendiest of hot spots, try widening your catchment area. You may end up slightly outside your original preferred area, but still close enough to the action, and probably with more space and within budget to be able to enjoy it.
Plus, don’t forget houses appreciate at a much faster rate than condos. So, if you are in a position to get a bit of support, definitely reconsider that home in the sky for one on the ground – especially if the pitter-patter of little feet isn’t far into your future.
Find the right realtor – a referral is required
Like dating, take your time to find the right realtor, one that shares your vision and knows your target areas. They should also be a strong negotiator and come with plenty of referrals. Don’t be afraid to take them out for a coffee (or cocktail) to see if you mesh. While you are house hunting, you will probably be spending more time with them than your friends. So getting to know them to find out if you have things in common will help avoid long, awkward and silent car rides between showings.
And be sure to snoop them on social media. A realtor that embraces technology will likely get creative when helping you find your perfect space. You never know where your dream home might be listed.
Avoid the teardown or major reno property
Unless you’re a contractor, avoid the teardown or major reno properties. Although programs on W Network and HGTV may paint a picture that DIY renos are simple, reality is quite different. Renovations almost always come with a long list of things attached – i.e., extra costs, tons of time, and mucho mess.
Gutting a house and reconstructing is a lot harder than most think. Unless you have experience, time and the funds to do it right, it shouldn’t be attempted.
Budget for the future
It’s so important to be prepared for hidden costs when budgeting out your property dreams.
Despite what many think, the amount of a bank loan and/or how much your parents are willing to chip in does not equal what you are able to afford.
Unexpected costs almost always arise (i.e. home ownership emergency costs, the furnace breaking down, a pipe bursting). When renting, property management is usually in charge of these extras, so don’t forget to account for them when you’re totalling things up. Spending your max budget, even if approved by the bank, is never a good idea.
Also, don’t be discouraged if you’ve read somewhere that 20 percent down is the rule of thumb. Yes, that may be true, but you should still consider putting 5-15 percent down if that’s all you can afford. If you pay the added insurance cost now, it may be beneficial in the long run.
Happy home buying!