Buying a home is a complicated task with many potential downfalls. Don’t let your experience be ruined by bad choices, learn from the mistakes of others and your move will be as easy as 1,2,3!
1. Trying to “time” the market.
It’s only natural for buyers to want to pinpoint the best time of year to buy a home. In our experience, August and December usually have the smallest number of active buyers, and therefore create good negotiating opportunities.
Though we have seen this firsthand, we have also seen our clients get impressive deals almost every other month of the year. In our opinion, the best time to buy a home is when you’re available to spend the time shopping and when you have your figurative “ducks in a row.”
These ‘ducks’ include:
- Savings for a down payment / closing costs
- A mortgage pre-approval
- A good understanding of how the process works.
After that, you’re ready. We believe that if you’re reading this article in March and you’re ready to buy, there is little to gain by waiting till August or December to pull the trigger.
2. Not getting approved by a lender prior to house hunting.
You’ve likely heard this many times before. There is no point in shopping for a home when you’re not sure if you qualify for a mortgage. And no, online calculators do not count. A pre-approval involves having a mortgage professional look at your financial documents, your proof of employment, and your credit rating. They then can look for the best deals and lock in your interest rate.
There are many benefits to you once you’ve completed this step:
- Have confidence shopping in your price range
- Know that your interest rate can only go lower during the next 3-4 months
- Be prepared to make an offer when the right opportunity presents itself
- Minimize the risk of losing the house of your dreams for the inability to remove a financing condition
- You may even be in a position to make a “firm” offer on a home if needed
- Home sellers will take you seriously.
3. Changing jobs before closing
PLEASE, PLEASE, PLEASE don’t do this. If you change employment before taking possession of your new home, your deal is in jeopardy. Financial institutions often re-confirm information provided prior to releasing funds to close the transaction. This includes employment details. If you must change jobs, be sure to contact your mortgage professional and your Realtor ASAP to discuss options available to you.
4. Offering on a home during your employment probation period.
We know you’re excited to pull the trigger and buy a new home, but shopping for a home during your 3 month probation period is a mistake. You won’t get financial approval from a lender. (See Mistake #2 above) Financial institutions do this because your job is not considered secure during this period.
5. Buying a new home without a spousal separation agreement.
Unfortunately, many marriages end in separation and divorce. Occasionally, a newly single individual wants to buy a new property quickly, before the separation agreement is finalized. This, however, is a mistake. Completing the separation agreement is critical to getting financing for the new property. Lenders want the entire picture of your financial obligations before offering you a mortgage. These include debts to be paid, spousal, and child support payments. Once completed, you’re in a better position to buy a new home.
6. Accumulating extra debt before taking possession of your new home (Ex: New furniture, car payment).
You’ve bought a beautiful new home and now you want to buy new furniture to decorate it and a new car that will look great in the driveway. However, this classic mistake can suck the joy out of the buying process quickly. Unless you’re paying for these things with cash that is not allocated for the down payment on your house, be sure to wait until AFTER you get the keys to charge them to your credit card. If you buy these “extras” on credit, it might push your financial borrowing ability over the limit and prevent you from getting your mortgage.
7. Focusing on condition of the home over location.
Have you heard the golden rule when buying real estate? It goes this way: “Location, Location, Location”. There are many excellent reasons never to forget this important rule; yet many buyers focus on how nice the kitchen and bathrooms are instead of prioritizing the area. Location of a property is more important than interior finishes because you can’t move a home from a rough neighbourhood, but you can improve the home in a desirable one. Homes in more desirable locations have many benefits. They appreciate more quickly in value, are often in better school catchments, and are generally perceived as safer. These things all add up to better resale value later on. If you’re buying in an unfamiliar city, it’s essential to hire a local realtor who can properly advise you and ensure you don’t make a poor decision. Hire us, we can help you! 🙂
8. Being too picky.
It’s normal to expect value for your money, especially with house prices being so high. Sometimes, though, we see buyers make the mistake of being unreasonably picky. In all our years of selling real estate, we have never seen a perfect home (even brand new homes). They all have their quirks and details that need attention. We suggest setting realistic expectations while house shopping. This is the best way to find YOUR perfect place to call home.
9. Being stuck on one neighbourhood.
There are valid reasons for having your sights set on a certain area. Whether it be the school district, proximity to family members, or commute time to work, you likely have some set boundaries for your search. You absolutely can find the right home in your desired area, but it might require more patience and cost you more money if your search area is very narrow. In a smaller area, there are fewer options available and other buyers may be willing to pay a premium for the same homes. If you can widen your search, you may open up more possibilities and opportunities to get a great home at a better price.
10. Not understanding current market conditions.
We sometimes work with buyers who have deeply entrenched, mistaken beliefs that hurt their ability to get into the market. Some of these are a result of taking advice from others who have not bought or sold for many years, and some just reflect how difficult it can be to be in the buyer’s shoes in the strong sellers’ market we are still experiencing.
Some damaging misconceptions involve:
- The amount of negotiation power/leverage a buyer has in a sellers’ market. We have a severe lack of housing supply and that means nearly zero negotiating power for the buyer. Many properties are selling far above asking price.
- The number of homes a buyer needs to see before choosing one. We’ve worked with buyers who have visited as few as one home to over 100 properties. It is unnecessary to view an excessive number of houses if you find one you love.
- Expecting too much home in the target price range.
- Expecting to win a bidding war with many conditions and a low offer.
If you struggle to reconcile the advice you receive from your realtor or loved ones, ask for examples of recent sales and how those buyers got their offers accepted. There are patterns that emerge in most areas, and trends you can rely on to set some reasonable expectations.
11. Not understanding what home ownership REALLY involves.
Most people would agree that home ownership is a wise choice, yet the weight of responsibility is a surprise to many first-time homeowners. Home ownership is more than paying mortgage, taxes, and utilities to reap capital gains. It also often involves expensive repairs and upkeep. It’s important to consider extra costs before pulling the trigger on a purchase to avoid a mistake you later regret. Looking at the complete picture early in the process can help you choose what type of home best suits your needs. Do you want a newly built home? It may cost more up front, but you’re less likely to experience large out-of-pocket maintenance-related expenses for many years (See #16 for a reality check on new homes, though!). Do you like the thought of a zero maintenance home where you can lock the door and leave without worry? If so, maybe a condo is your best bet. Honest self-examination is crucial. We can help you through this important step. Let us know when you would like to schedule a time to get together to talk over some options. In the meantime, take a few moments to answer these questions:
- Are we handy enough to make necessary repairs ourselves, or will we need to call someone every time something breaks?
- Will we enjoy making such repairs, even if we are capable?
- Do we enjoy yard work and exterior upkeep?
- After buying a home, how long would it be before we could we afford a large out-of-pocket expense like a roof, furnace, or foundation repair?
- What is our lifestyle like? Do we need a yard for pets? Do we like to entertain? Will we require separate spaces for home offices, the kids, or hobbies?
- Do we prefer a carefree experience with as little upkeep as possible?
12. Not researching areas before buying
For many buyers moving to Hamilton, it’s easy to gravitate toward the most “affordable” housing options. However, unless their agent knows the neighbourhood, buyers who are unfamiliar with the area are at risk of making a poor buying decision.
This highlights the need for two things:
1. Do your homework. Thoroughly research the neighbourhoods you’re considering and completely understand what they are like. Take a drive through the areas at different times of the day to get a true feel for them.
2. Hire a local agent who is familiar with the area. Be clear about what you are looking for and what your own deal breakers are. Neighbourhoods change quickly in Hamilton, sometimes block by block. Work with an advisor who can steer you in the right direction. To start your research, check out our neighbourhood pages here. When you’re ready to look at homes, contact us here.
13. Picking a lawyer based on price
Hiring a lawyer is an essential part of the buying process. They ensure your closing day goes smoothly. Sadly, not all lawyers do a thorough job. When lawyers drop the ball on important details, it can negatively affect buyers. We don’t want this to happen to you. Please don’t choose a law firm based on price alone. Select a lawyer based on personal experience or a solid recommendation from a trusted source – an experienced friend, colleague, or your Realtor. This is especially important during Covid-19. Many lawyers have been slow to adopt modern technology and some are struggling to make needed adjustments. Your lawyer should be:
- Capable, fresh and eager
- Thorough, respectful and diligent
- Aggressive when they need to be. Unfortunately, some transactions turn sour. You need a lawyer who protects you and fights for you. If your legal representative is soft and yielding, this could cost you dearly.
When it comes time to select your lawyer, ask about more than how much they charge for their services. Ask for references and find out how they handle situations that become contentious. Or, if you prefer, ask us who we use. We will be happy to share some experiences that may help you make your selection.
For more info, read “How to choose a Real Estate Lawyer”.
14. Assuming a fixer-upper is always a good deal
This happens time and time again, especially in a strong sellers’ market. A neglected or distressed property seems like a good deal until you realize how expensive repairs are, and that a renovated home might cost less.
We recently worked with a young couple looking to buy a home on a $600,000 budget. Here is what we learned:
Many of the homes priced at $500,000 required a $100,000 renovation. Most of those were receiving multiple offers over asking. After spending time and energy, and dealing with the stress of a 6-figure renovation, the house would only be worth $600,000. That hardly sounds like a deal.
Another option – the renovated house. Our client skipped the fixer-upper and bought a beautifully renovated home for $582,500. How, you ask? It was a flip project that the seller had purchased the year before at a lower price. Because of this, his profit margins were higher, resulting in a win for both parties. Now our clients are enjoying the summer, relaxing in their beautiful pool, and living in a fully finished home.
The moral of the story is: Not all fixer-uppers are a good deal.
15. Missing first-time buyer opportunities
First time home buyers can use all the help they can get! Below are two non-mandatory programs that might help you out.
- The First Time Home Buyer Program (HBP) – This program allows you to use RSP money toward your down payment. Even if you have your down payment waiting patiently in a regular bank account, not taking advantage of this program could cost you big time! Click here to read more about it.
- CMHC Shared Equity Buyer program – This program is relatively new. The Canadian Mortgage and Housing Corporation is a government-owned entity. They provide mortgage default insurance for home buyers, but are also currently offering a down payment assistance program. You can read about it here.
16. Assuming a brand new home comes completely finished.
Buying a brand new home definitely has its perks. You get to pick the lot, layout, and interior finishes. This does not, however, mean that there will be nothing for you to do when you get the keys.
Here are a few items you should budget for:
- Window coverings -the cost of blinds, shutters, and drapes can add up quickly.
- Landscaping (front and back) – When you get your keys, the exterior will be very basic. You could spend tens of thousands of dollars on decks, patios, pools, decorative stone, and more.
- Perimeter fencing – Neighbours often share the cost of building fences in new subdivisions. Even after splitting the expense, though, it can set you back thousands of dollars.
- Finishing the basement – This adds essential extra living space for many families. It’s a glorious place to build a theatre room or let the kids disappear for a while. Costs to finish a typical basement average around $50-$60 per square foot. If your basement is 1000 square feet, expect the bill to be $50,000-$60,000.
- Appliances – If bringing your old appliances to your new home doesn’t sound appealing, you’ll want to budget for new ones. It’s easy to spend $10,000 on a decent package.
If the thought of completing (and paying extra for) these projects doesn’t excite you, consider buying a re-sale home that checks most of your boxes.
17. Not understanding how negative influences affect property values.
A home’s value will largely depend on what is and isn’t nearby. It is important to pay attention to the surroundings of a home you want to buy. Here are a few examples of nearby influences to consider:
- Commercial buildings
- Apartment buildings
- Hydro towers
- Major streets and highways
- Lack of services
Read the article – what affects the value of a home?
18. Choosing a home’s character over function.
Hamilton is home to entire neighbourhoods of gorgeous character homes. These homes possess a feeling which is impossible to replicate in modern construction. It’s easy to fall in love with the tall ceilings, intricate millwork and exposed brick walls. That said, these homes come with a few downsides you need to be ok with….so let’s consider a few.
Small or non-existent closets: Times were different. People didn’t own the vast amounts of clothing we have today. They built houses with tiny closets that can be less than practical for modern living.
Disproportionate room sizes: We use the space in our homes differently now. We spend more time in our bedrooms and kitchens, and we often eat in the living room. The design of many older homes included a compact kitchen and small bedrooms – but huge dining rooms. Generations before us would have been insulted to think of eating anywhere but at a formal table! Also, a main bedroom ensuite bathroom was often unheard of.
Unusable basements: We use our basements as extra living space while past generations used them mainly for storage and workshops. Many older homes have short basements with little to no usable living space.
This is not to dissuade you from buying your dream character home. We only want you to consider the pros and cons before making your decision.
Another option is to add character to a home that has a more desirable layout and modern features. It’s easier to add character to a functional home than to add functionality to a character home.
19. Being dishonest on the mortgage application
This “mistake” can actually be a criminal offense. Being dishonest on your mortgage application is a BIG no-no. Financial institutions are very thorough when verifying information and will find out. When they do, your deal will fall apart and the seller can sue you if you’re unable to complete the transaction. Being dishonest on your application includes providing false information about where you work, how much money you make and providing fake financial documents. If your mortgage broker is suggesting you falsify information, it’s time to run.
20. Being dishonest with your Realtor
Being dishonest with your Realtor will limit their ability to help you. A good Realtor acts as a consultant and advisor. We need to know important information about your financial situation and your plans and goals. Although you may feel awkward sharing this information, you might not reach your goals unless you do so.