by Romana King
Originally published on moneysense.ca
November 13th, 2015
If you’re considering buying your first home, you probably want to do a bit of research. Perhaps you’ll talk to friends and colleagues and even read a few pieces regarding the process, but with 80% of first-time homebuyers confessing they’d love a do-over, you really need a strategy.
To help here’s a list of the top 9 mistakes first-time homebuyers make and tips on how to avoid making these errors.
1. You fall in love with home staging
Everyone knows this. Everyone trots this piece of advice out—particularly as they swear up and down that they can see past the old-fashioned wallpaper to the home’s potential. Then reality hits, as potential buyers start to see staged homes versus original decor.
In its simplest form, home staging is when the seller declutters and rearranges the furniture to make rooms look bigger. These days, however, some sellers remove almost all their belongings to make room for a staging company to come in and completely redecorate. The effect? Stunning displays of unblemished design perfection. Playful bedrooms, serene spa-like bathrooms and spotless kitchens.
Problem is there’s a big gap between this idealized way of existing in a home and how we actually live in a home. For instance, stagers will often remove necessary appliances—such as coffee makers, microwaves and blenders—to make counters seem more spacious. Some will even go as far as to remove doors to make older homes seem more airy and open. In addition to these tricks, stagers can use undersized furniture to make rooms seem bigger.
The trick is to not fall in love with the current decor and to actually imagine where you would put your current belongings (or the furniture you plan on buying when you find your ideal home). Do this by examining each room to determine if it would actually suit your lifestyle and your furniture. And look for design elements that would require a great deal of money to change. For example, if the current open-concept kitchen is in the front of the home and you really want a kitchen towards the backyard, just know that it would cost quite a bit to make this change.
Also, remember to ask about key components of a home. A decorative flourish can be removed and updated at a relatively small cost, but repairing a roof or updating electrical components can be expensive, out-of-sight upgrades.
“Most people fall in love with a show home look, but you have to realize that everything you see is stagecraft,” explains Stacey Garrett, an industry insider with more than 20 years experience in home staging (we’ve changed her name to protect her privacy).
2. You shop distracted
I know it’s hard. You have children and they get bored as you traipse from house to house, peering into closets and underneath sinks. Every parent in the midst of house-buying knows: Kids add chaos to an already difficult home shopping experience. I’ve had to reschedule viewings—or view homes alone—after parents bailed to take the cranky toddler back to the apartment for some much-needed rest and relaxation.
While house-shopping with kids in tow can mean you miss things it can also lead to resigned behaviour—settling and bidding on homes out of desperation rather than waiting to find the house that suits your needs. To avoid this, consider working with an agent who will double-up the viewings (take one parent one night and the other parent the next night) or create a plan where one parent views the home while the other entertains the child in the yard (very often agents will gladly step in to help with this strategy). Even better, block off times where both you and your spouse can view a home together by hiring a babysitter (or ask a family member to watch them for a few hours). That way you can take your time and concentrate—paying attention to the most expensive purchase you’ll ever make.
3. You trust the floor plan
Most people, including myself, would assume that if a listing states a room is 12-feet by 10-feet, that those are the measurements. But more often than not these measurements aren’t accurate. It’s not that the seller or their agent is intentionally trying to deceive—errors in measurements can be introduced in a number of ways.
For example, I’ve seen square footage and room measurements copied number for number from building plans, but the actual measurements of these rooms don’t take into consideration that the builder had to change the dimensions to accommodate some behind-the-walls issues. Another problem I’ve seen is when agents and their offices enter imperial measurements using a metric setting. Next thing you know all the measurements are inaccurate and a quick correction may mean smaller or larger room measurements than originally intended.
It was a lesson Ken Grunber, who works at a video production house in Toronto, learned after he bought his condo unit in 2007. Despite being advertised as a 700-square-foot one bedroom plus den, Grunber was shocked to find out that the condo was actually 560-sf—only when you counted the balcony and bathroom did it start to creep past 700-sf (Hint: You’re not supposed to count bathrooms or outdoor space in a square footage count.) For those looking at newer build condos be warned: It’s not unusual for condo sales staff to include balcony or terrace measurements as part of the total square footage.
Regardless of how it happens the best way to avoid later surprises is to take a tape measure and actually measure the rooms yourself.
4. You don’t investigate the neighbourhood
Do you know someone who moved into a fabulous home only to find out that they hated the commute? That’s exactly what happened to Mikala and Thomas Hees (we’ve changed their names to protect their privacy). After buying a beautiful bungalow in the east-end of the Danforth Village in Toronto, the couple realized how much they hated commuting to downtown. “It’s not a long commute,” says Mikala, “but we soon realized we missed the hustle and bustle of downtown living and dreaded the half-hour transit commute.”
According to one survey, 35% of home buyers felt the commute to their new home took too much time away from their family. While these home buyers loved the house, they didn’t love the commute, or the community or the schools.
To avoid these regrets, make sure you investigate the neighbourhood thoroughly before buying. Check out the local commercial area, talk to neighbours about schools and community centres and walk around to find daycares, coffee shops and the closest take-out grub (you know you’ll need it). Also, keep an eye out for tell-tale signs of people like you. If you’re a new family, look for kids’ toys. If you like skiing, look for ski racks on cars. Chances are the more you connect with your neighbours, the more you’ll love living in your home.
5. You don’t ask for comparables
I can’t imagine a single real estate agent that wouldn’t give a potential buyer a list of comparables—homes that have sold recently in a particular neighbourhood or area. However, not all agents are totally forthcoming with information.
For example, a colleague recently purchased a resale condo in North York. Her offer price was based on a list of comparables that were provided by her realtor. But a mere 24 hours after signing the paperwork my colleague was given a complete list of comparables—a list that included more sales and units that were more similar to what she had bought. Based on this list, she felt she overpaid by $4,000. Not a significant amount, but enough to leave a bitter taste in her mouth.
A good way to avoid this is to request exactly what you’d like to see. If you’re shopping for a three bedroom home with two bathrooms ask to see the houses that sold that match these parameters. Then start expanding your search out so that you can make a good assessment of the property and area. A good realtor will happily accommodate these requests—and help contextualize the rationale behind the sale prices. But at least you’ll know you are comparing apples to apples.
6. You don’t get a pre-approved mortgage
It’s so simple. You can even do it online. But I still run into buyers who haven’t been pre-approved for a mortgage but have already started their house shopping. For many, the reason is they want to see what’s on the market. My response: What if you find the perfect home only to lose out because you don’t have your financing in place? Don’t laugh. It happens.
The easiest way not to get caught is to make sure you get pre-approved for a mortgage. It’s simple and usually only takes minutes of your time. For more information on the mortgage application process and the documents needed, go here.
7. You don’t bother with an inspection
There was a point in time where any buyer who didn’t get a home inspection was considered foolish. These days, however, a request for a home inspection can often mean the difference between winning a bidding war and returning to the house-hunt.
In buyer’s markets—where sellers scramble to attract buyers—always make sure you include an inspection as part of your offer. The $300 to $800 you pay is well worth it as, very often, inspectors will uncover maintenance issues that need to be dealt with before they become major problems.
In tight, competitive markets consider booking a home inspection during a buyer viewing. Just ask your realtor to schedule a two-hour (minimum) buyer viewing and book a home inspection during this time. That way, when you go into the bidding war you already have a good idea what issues come with the home.
8. You forget that everything is negotiable
Recently, a first-time homebuyer with a lot of equity asked why I bother to negotiate on deals where the seller and buyer are so very far from the middle ground. My response: Because everything is negotiable.
While price is king in most real estate transactions, you can’t discount the other terms. Factors like closing dates, fixtures to include or exclude, and maintenance or repairs to be completed before closing day are all up for negotiation. As is a realtor’s commission. (Although, you’ll have to negotiate and settle on this before you actually go house-hunting.)
If you find yourself really stuck on one term, examine your purchase contract. Is there another condition that you can be flexible on? If so, let it go. Very often the best deals are the ones where neither party walks away feeling like they won, but, instead, walk away feeling like they negotiated well.
9. You get ambushed by closing costs
When you sign and finalize a purchase and sale agreement, the down payment and the purchase price are not the only two costs to take into consideration.
As a buyer you will have to factor in other closing costs. A short list of what to consider includes:
- Land transfer tax (which varies from city to city and province to province and can even fluctuates based on your purchase price cost)
- Mortgage set-up costs (which can include a mortgage-related appraisal, as well as mortgage default insurance premiums if you’re putting down less than 20% on the home)
- Home insurance premiums (you typically can’t get a mortgage without home insurance)
- Adjusted utility and property tax costs
- Legal costs
- Title insurance
See other costs to consider here.