By Sean Schaefer
Buying a home is a complicated process. On one hand, it is very dry and technical because of the paperwork involved. However, it is also emotional and the financial liability may cause sleepless nights. When would-be purchasers see what they believe is their dream home, emotions may cloud their better judgment.
Anyone entering the real estate market should avoid these common mistakes, especially first-time buyers.
Searching for a home before being pre-approved
In hot housing markets such as Edmonton, you may be up against multiple bids when it comes to desirable homes. That is why buyers need a pre-approval letter from a financial institution to be taken seriously by buyers. This letter shows the amount you are qualified to borrow, giving the seller assurance that your offer to buy is serious. Before preapproving you, a lender or mortgage broker will consider your assets, income and level of debt. You will also need proof of employment and assessment notices from the Canada Revenue Agency. Mortgage pre-approval letters also include an expiration date, usually 90 days.
Buying a home without a real estate agent
Anyone can browse through their local MLS and find homes that seem ideal, but a real estate agent can do much more than that for you. From the initial pre-qualification stage to determining your budget and your ideal location, an agent can identify properties that match your wish list and arrange showings with listing agents. When it comes time to make an offer, they will act on your behalf up to closing time, ensuring the process is as smooth as possible. Click here for advice on how to find the right real estate agent. Typically, you will not be charged for making use of a real estate agent when purchasing a home. Rather, the agent is paid by the seller. As such, it is a good idea when purchasing to engage an agent at no cost to you.
Being fooled by the home staging
Professional staging companies can improve the look of any home by removing furniture and bringing in playful pieces that look good but may not suit the reality of everyday living. A spotless kitchen may not include a coffee maker, microwave or food processor, since these take up counter space. Likewise, compact furniture will make small rooms look bigger but is that furniture practical for your lifestyle? Remember, you are buying the home to suit your family so do not be fooled by the atmosphere the home stager has created.
Throwing all your savings into the down payment
You do not need to be told that bigger down payments are almost always better. After all, you will have less to carry as a mortgage. However, do not deplete your savings on the downpayment as many other costs will have to be covered. Plan to spend up to four per cent of the purchase price of the home on items such as property insurance, title insurance, lawyer fees, home inspection costs, moving expenses and more. After the purchase is made, you will need money to buy things for the home and deal with ongoing costs and taxes. You should take into consideration the monthly property tax cost in conjunction with the monthly mortgage payment when budgeting.
Skipping the home inspection
Many homes look flawless when you walk in, thanks to fresh paint and other interior décor touches. But what issues are lurking behind those walls and parts of the home not readily visible? A qualified home inspector can answer those questions. They can identify past water damage, termite infestations, HVAC and electrical system shortcomings, structural and engineering issues and estimate when you will need a new roof or furnace. If you try to save money by skipping on the home inspection, costly repairs could await you in the future.
Not exploring the neighbourhood
Any urban house is part of a neighbourhood so make sure it offers the amenities you and your family will want once you are living there. If you have children, well-regarded schools and playgrounds are important. If you do not have an automobile you may want to be able to walk to shopping areas. Consider also how the home’s location will affect your commute to work. The location and surrounding amenities will also affect your home value when it is time for you to sell.
Refusing to compromise
There are many things you will be looking for when choosing a home besides the cost and location – the number of bedrooms, a backyard, a garage, proximity to transit, etc. – and few people can check off all the boxes when it comes time to buy. You may not get everything you were looking for but be flexible. You should be satisfied if your home meets most of your desired goals.
Underestimating the cost of renovations
Some people prefer vintage homes with timeless features such as wainscotting and antique light fixtures. But if the kitchen and bathrooms in these homes have not been updated in recent decades, be prepared to spend a significant amount of money on those improvements. Any homeowner can tell you that renovations can be expensive and can drag on longer than first estimated, so be prepared.
Not retaining an experienced real estate lawyer
While it is possible to purchase a home in Alberta without retaining the services of a real estate lawyer (if it is an all-cash deal with no mortgage), a home purchase without legal counsel is a foolish move in almost all cases. Expert legal advice can help protect what may be your largest investment. Keep in mind that once you sign a purchase agreement it is difficult to back out. The services a real estate lawyer offers include reviewing all documents involved with the sale and doing a title search to ensure the property is free of liens, debts and title defects.
Contact us for assistance
Real estate lawyers are familiar with the language and contractual terms encompassing a home purchase. If you miss a closing date or fail to meet all the conditions in the purchase agreement, you may find yourself in legal jeopardy. Anyone in northern Alberta can contact us when they are buying or selling a property. Contact us for a free telephone or video consultation.