Common Mistakes You Should Avoid When Buying Your First Home
Buying and Selling Real estate has many twists and turns. It is one of the biggest investments the average person will ever make in their lifetime. As a first-time homebuyer, it is crucial for you to make a well-informed decision and apply all strategies possible to guide you through the complex process of investing in real estate property.
Here is a list of common mistakes to avoid when buying your first home.
Skipping the pre-approval process: Skipping the pre-approval process, or relying only on an online pre-approval is one of the biggest mistakes you can make when looking for a mortgage. Online pre-approvals are simply not sufficient. Make sure you meet a mortgage specialist as he/she will collect information such as employment letters and credit reports and answer all your questions. In fact, I recommend speaking to a few mortgage providers to compare the rates and customer service. Don't be shy to shop around! This process may be time-consuming, but it will clear any doubts you have and will help you make a more informed decision.
Inaccessible down payment: When buying a property in Toronto, it’s typical to provide a deposit of 5% of the purchase price to a seller when your offer is accepted (sometimes within 24 hours after acceptance). Make sure this amount is readily available in your bank account. Many first-time home-buyers use funds from their Registered Retirement Savings Plan (RRSP) and having access to it can take approximately 5 days. For example, if you are purchasing a property for $500,000 the seller would require a cheque for approx. $25,000.
The Absence of Buyer Representation: You might not want to tell the real estate agent that represents the seller all your secrets when buying property. Depending on how the agent is representing your interests it could be a big mistake! The Seller's agent represents the seller’s best interests and is contractually obligated to tell the seller everything that you disclose to them ie. what you can afford, your motivation for buying, ect. Find and work with a real estate agent that represents YOUR interests so that you can make a sound decision with their advice. If you decide to use the seller's agent to buy a property, make sure you establish a client relationship with them immediately so they can't disclose important information to the Seller. For more details on multiple representation (when an agent represents both the buyer and seller) give me a call!
Lack of Vision: Don’t let your first impression of a property dictate your buying decision. You could be overlooking great properties that could fit your needs. The property you are visiting may have hideous wallpaper, a hoarder basement, and dusty old curtains. Try to ignore the imperfections and picture where you would add your style, décor and furniture. If you find a house in a preferred neighborhood for the right price, bring in a contractor before you buy to help with the vision of what you would love.
Plan for the future: Your current lifestyle may change in the next three years. Have you considered such a possibility when presently purchasing your property? Look into the zoning and building codes for your future projects and vision. Do not make the mistake of not checking whether the property will suit your needs in the few upcoming years.
Making an offer based on the asking price instead of researching market value: Before submitting an offer on a property, request a list of properties sold during the past 120 days from your real estate agent. Evaluate the sold prices and features of the properties compared to what you think your desired property is worth. This process is called a comparative market analysis (CMA) and will help in making an informed decision as you don’t want to lose out on the property by offering the wrong price ie. overpaying or underbidding for it.
Reach out to Sarah Spegel, an experienced real estate agent in Toronto, ON, to avoid these common pitfalls when buying your first home. Click here to visit my website.