10 Costly Mistakes Home Buyers Make
#1: Not knowing what you can afford before making an offer.
The best way to avoid this is to get pre-approved for a mortgage so you know exactly how much you can afford. Usually pre-approvals are free. This way you know exactly what you will be paying monthly and you will know exactly how long it will be until your mortgage is paid off. If you shy away from doing this, you can run into severe issues such as not having any excess money and living far below your current means because you didn’t budget properly. It is a very easy process and no homebuyer should avoid knowing what they can afford.
#2: Not knowing who the agent represents.
Unless an agent is working as your buyer representative, they represent the seller. Many people don't realize this. This means that the agent you are working with is trying to net the seller more money, forcing you to spend more money than you should. If you know you have an agent working by your side to help you get the best deal possible, you can easily save thousands of dollars. Watch your back!
#3: Choosing the wrong mortgage.
A bad mortgage can cost you thousands in taxes and interest. Consult an accountant before you choose your mortgage. Similar to what we mentioned in point #1, if you can’t afford your mortgage or miss a payment you will accumulate interest. This happens incredibly fast, so do yourself a big favour and make sure you won’t be missing a single monthly payment! Accountants are your friends, especially when buying a home.
#4: Not finding problems with the home before buying it.
You should always have a professional inspector look at the home before buying it, otherwise you could be looking at huge repair costs later on. Imagine you saw a crack in a wall but never thought to inspect it, only to find out after buying the home you need to rip the whole wall down! Security is important, and investigating flaws with the home you plan to buy will ensure your security is as high as possible. Read this guide to avoiding a money pit.
#5: Not understanding how your credit can impact your ability to purchase or refinance a home.
Our old friend tried to buy his first home with a suffering credit score. He later found out that he was barely eligible for a mortgage - his down payment was $330,000 when he initially thought it was going to be about $70,000. Get a mortgage professional to help you go over and prepare your credit file before you buy a home.
#6: Not understanding housing market trends.
The market fluctuates between two states - a seller’s market and a buyer’s market. A seller’s market is when the market is in the seller’s advantage, and sale prices will be more in favour of the seller’s asking price. This means houses will cost more on average. In a buyer’s market, the opposite happens. Sale prices are in favour of buyers, causing prices to be lower and saving buyers money. During the Toronto real estate bubble a couple years ago, it was a major seller’s market. Home prices skyrocketed, and buyers had to chase the homes they wanted to buy by paying up to 70% more than they could have just a year or two before. That can be hundreds of thousands of dollars! As of October 2019, it is the other way around but not to the same extent. More homes are being purchased for under their initial asking prices instead of equal to or greater than their asking prices. Buyers have the advantage right now, so it is a much safer time to buy. The market has settled.
#7: Not considering home resale value.
This point transitions nicely off of point #6. If the home you bought was $1,000,000 in 2014, and you bought it at $1,600,000 in 2017 as the seller’s market happened you likely didn’t consider it’s resale value. Now that home is likely going to sell for about $1,200,000. Either you have to live there for some years until you can sell it without losing money or you have to sell it and lose $400,000 which is a major loss. If you consider resale value before purchasing a home and know what type of market you are in, you can potentially save yourself a few hundred thousand dollars.
#8: Trusting a verbal agreement when buying.
Imagine you find the perfect home at the perfect price, and the seller agrees with you promising that will be the final deal. Next thing you know, you visit to sign the papers and you have been outbid - so the seller backed out of the verbal agreement with you. If you do not have a signed agreement, the deal is not closed. Watch out for this because if you really wanted that home, you would try to bid again and pay more!
#9: Falling in love with a property, home or location.
When you are in love, you let your guard down! You may suffer a financial loss due to this, or even a big hassle among other things. You are not nearly as cautious about the other things mentioned in this list when you fall in love with a house. Love is terrific, but it can be very dangerous when buying a house.
#10: Pick a buyer’s agent you trust and listen to them.
If you don’t trust the agent you have been talking to, you shouldn’t work with them! Just like any other business, there are experienced and less-experienced agents. When an agent gains your trust, you should listen to them as they have your best interests in mind. They have proven to you multiple times that they want to help you find the perfect house at the most appropriate price. This is who you should listen to, not somebody who yells at you and doesn’t take your input.
If you want to do some research on houses within your search criteria, please follow this link by clicking here to visit our Map Search and continue on your browsing journey now that you know so much more. Best of luck!