First time home buyers have lots of questions; seasoned home buyers have even more. Here are six mistakes that you should avoid when making a home purchase:
- Not having a budget
- Driving around to find a house
- Trusting the seller
- Not having sufficient cash on hand
- Thinking all you need to pay is just the price of the house
- Not getting expert help in negotiation, selection and closing
The first step in looking for a home is determining a budget BEFORE you look at homes. It’s always best to talk to a mortgage broker to determine how much money they can lend you. This, combined with how much of your own money you have on hand, will determine your maximum. There are plenty of free calculators on the internet which will give you an idea but it could be off by tens of thousands of dollars given all the nuances involved.
Finding the right house can be a straightforward or a complicated task depending on your needs and wants. The best place to look for a home is on the MLS but don’t overlook networking. Many times homes are not yet up for sale but are about to be so be sure to ask around. If you can’t find your home on MLS you can try private ads on Kijiji, Craigslist and other websites. Be prepared to know the ‘true’ value of any home you see though so you don’t overpay or miss out on a great deal. Real estate agents have access to all the homes (sold and otherwise) thru the MLS and given the extensive network they can often uncover your perfect house right away.
Sellers, despite what they are saying, all want to sell their home as quickly as possible, with the least trouble as possible and for the most money as possible. Buyers should want the first two as well but naturally want to buy for the least money possible.
Having a firm knowledge of homes real value as well as the buyers and the seller’s motivation is key to getting the best deal. Deals have been completed for less money due to better closing dates and conditions so don’t focus only on price. If you don’t know what similar homes have sold for you may find you are paying too much, even if you think it’s a great deal. Knowledge is key to paying the right amount for instance; does owning a pool add value or decrease value? Full time, professional real estate agents deal in homes every day and can tell you what adds value, what decreases value and what will motivate a seller to accept a lower price. The agent will also advise you on what extra wording should be in the contract to protect you from buying a house with problems.
A deposit is an amount of money you give the seller as a sign of good faith. The money stays in a trust account that cannot be accessed by either side until the deal either completes or falls apart. A general rule of thumb is to have 3-5% of the purchase price set aside as cash for the purposes of the deposit as this will be your first real outlay of cash. The amount is determined by the situation, the overall cost of the house, whether you are offering a low or high price and if you are in a competition.
Inspections will require a payment so be sure to ask for prices. Once you have agreed on the sale price you may need to perform tasks like getting a home inspection, discussing plans with a contractor, getting other inspections on key elements to ensure there are no hidden problems. Even if you decide to not buy the house based on their reports they will still need to be paid.
You will also need to set aside money for moving, lawyer fee’s and land transfer taxes to name a few. Aside from the lawyer fee’s will be other closing costs such as title insurance and reimbursing the seller for any fee’s they may have paid into the future (property taxes).
Understand, and differentiate you needs and wants, Real estate agents are trained at asking important questions to get to the core so you don’t waste valuable time and money. This information along with your budget will allow the agent to provide you will several alternatives that you may never have thought about (detached, semi, town, condo, co-op, co-owner) in area’s you might not have known much about. It’s their job to present you with options that fit your criteria and, once you find the right place they will negotiate the best deal. They will uncover details about the home and the seller that will work to your benefit. Lastly, they will guide you through the entire process to ensure you are satisfied. Great agents always go above and beyond building a loyal client base for years to come.