If you have been following my blogs, you will know that a flood of buyers have come on the market hoping to take advantage of lower prices and record low interest rates. The mistake many new home buyers make is forgetting to calculate the additional cost associated with real estate purchases and sales.
There are many things a first time home buyer should consider well before they start searching for a home. You will have to think about your down payment (anything less than 20% will cost you an additional CMHC insurance payment), mortgage pre-qualification and other costs and fees associated with closing a real estate transaction.
The following is a check list of all things to be considered throughout the entire process:
1) Find a local expert realtor you are confident will work hard in your best interests.
2) Arrange financing with a bank or mortgage broker so you know how much you can afford to spend. You realtor will be able to make suggestions, but make sure you shop around for the best rates available.
3) Find a local real estate lawyer. Ensure that the lawyer you choose actually specializes in real estate transactions!
4) Call the company that insures your cars to ask them about home insurance. Call a few companies to find the best rates, but you can often get a discount if you bundle your car insurance with your home insurance.
5) Call utility companies. You will have to arrange gas, hydro, water, cable, phone, internet, etc.
6) Arrange movers. Moving companies cost much more than a case of beer and a box of pizza.
Purchasing a home costs much more than the price of the home and these costs must be factored in before you sign an agreement of purchase and sale. As buyers, you are exempt from paying your realtor (the sellers pay agent's fees) and as first time buyers, you are also exempt from paying land transfer tax.
Lawyer fees can run approximately $1000 but they are very integral to the process. They search and confirm title to the property, physically close the transaction, register and prepare any mortgage documents. Another expense to consider is the initial property deposit, which is part of the down payment. 24 hours after an accepted offer, you are obligated to provide a deposit on the property. That can range from a few thousand dollars to a certain percentage of the purchase price.
By sitting down and making a list of all of the expenses associated with a purchase, you should be able to work out what you are comfortable paying. Also, when you are working out how much you can afford as your monthly mortgage payment, please do not forget to factor in your property taxes and your insurance!
Your realtor should be the person you look to for this advice which makes choosing your realtor one of the most important decisions you can make in this entire process. First time homebuyers should choose a knowledgeable local realtor with a good reputation and one that has come highly recommended by someone you know and trust. I often hear ‘He was alright' when asking people about their previous experiences with realtors. For an investment of this magnitude you want to choose someone who provided service above and beyond the expectations of the person referring the realtor. You also want to hear an emphatic "YES" when asked if they would use that realtor for their next real estate transaction.
When buying, confirm your realtor thoroughly researches past neighbourhood sales, explains the costs of work that will need to be done to the property and also has a thorough knowledge of the current real estate market in your area to ensure you do not over pay for the property. When selling, have the realtor provide you with a written report of recent solds and properties that are currently active in your neighbourhood so you can establish a reasonable list price that will get your home sold in the shortest period of time.
For new home buyers, the Ontario government plans to blend the federal GST with the provincial sales tax next year, which could significantly increase the final price as many of the services that currently do not charge PST, will now get 8% more expensive. On new homes, where GST is already included, the tax harmonization will apply another eight per cent provincial tax to houses worth more than $500,000. New homes worth under $400,000 will not face the additional tax, while those between $400,000 and $500,000 will pay the tax but get a rebate.
I am not trying to scare anyone away from home purchasing, but I would be remiss if I didn't make you aware of all the costs that must be considered when purchasing a home. For more information on buying or selling real estate in Burlington, Hamilton or Oakville, Ontario, or if you have questions about current market trends, mortgages or interest rate information, please visit me again on my website www.seansells.ca or call me at 905-220-9198 and I'd be glad to answer any questions to accommodate all of your real estate needs. I can also be reached at www.realestatechat.ca as I am now a moderator on the Ontario Real Estate chat forum as well as the Burlington, Ontario sub-forum.
Happy house hunting!